UC-NRLF 


$c  lb  nfi 


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20 -CENTURY  i 

BOOKKEEPING  &  ACCOUNTING 


COMPLETE. 


^-^.M.     ^y^A^^rn/'lAy  "A,/„ 


Digitized  by  the  Internet  Archive 

in  2008  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/20thcenturybookk00bal<erich 


20th  Century  Bookkeeping 

and        *  .  •  ...  :   ::"...;.... 

Accounting. 


A  TREATISE  ON  MODERN  BOOKKEEPING,  ACCOUNTING,  AND  BUSINESS 

CUSTOMS,  AS  ILLUSTRATED  IN  THE  "BUSINESS  TRANSACTIONS" 

WHICH   ACCOMPANY  THIS  WORK. 


THE    ONLY   SYSTEM   OF   BOOKKEEPING  IN  WHICH  THE   TRANSACTIONS,  AS  WELL 

AS    THE   BUSINESS    PAPERS    THAT   ILLUSTRATE   THEM,   ARE 

IDENTICAL  WITH  THOSE  IN  THE  BUSINESS  WORLD. 


FOR  USE  IN  ALL  SCHOOLS  THAT  TEACH  BOOKKEEPING  AND  ACCOUNTING. 


Bv    JAMEIS     \A/.     BAKEIR. 

M 
ASSISTED      BY 

COMMERCIAL      TEACHERS      AND       PRACXICING      AOOOU  NT  A  N  TS. 


published  by 
South-Western   Publishing  Co. 
Cincinnati,   O. 
1912. 


^z5 


Copyright,   1912 

SOUTH-WESTERN  PUBLISHING  COMPANY 

Cincinnati,  Ohio. 

EDUCATION  DEPT. 


PREFACE. 


YEARS  of  experience  in  the  office  and  schoolroom  have  convinced  the  author  that  the  best  method 
of  teaching  the  principles  of  bookkeeping  and  accounting,  that  they  may  be  permanently  fixed 
in  the  mind  of  the  student  so  that  he  may  be  able  to  put  them  into  practice,  is  by  having  him  record 
business  transactions.  These  transactions  must  be  a  reproduction  and  not  an  imitation.  The  student 
must  be  led  to  feel  that  the  results  he  obtains  are  just  as  important  as  those  obtained  by  the  book- 
keeper or  accountant.  .When  presented  in  this  manner,  the  student  will  learn  to  appreciate  the  im- 
portance of  a  correct  record  and  accurate  results. 

The  object  of  this  work  is  to  teach  the  student  the  fundamental  principles  of  bookkeeping  and 
accounting,  the  practical  application  of  these  on  the  various  books  of  original  entry,  and  many  of  the 
important  short  cut  methods  used  by  modern  bookkeepers  and  accountants.  He  learns  this  by  re- 
cording business  transactions  which  are  a  reproduction  of  those  which  occur  in  business.  These  are 
represented  to  him  by  business  papers  which  are  also  a  reproduction  of  those  used  in  business. 
Every  paper  is  reproduced  in  detail  that  the  student  may  get  the  correct  idea  of  the  form  and  use 
of  the  paper. 

To  suit  the  conditions  that  exist  in  the  different  schoolrooms  and  to  permit  the  teacher  to  make 
his  course  as  long  or  short  as  desired,  the  work  is  divided  into  four  sets,  each  of  which  is  separate  and 
distinct.  While  it  is  necessary  to  complete  the  four  sets  in  order  that  the  student  have  a  thorough 
knowledge  of  the  subject,  yet  he  may  discontinue  at  the  end  of  any  one  set  with  this  knowledge  being 
complete  so  far  as  he  has  advanced. 

The  first  set  is  intended  to  teach  the  student  the  fundamental  principles  of  bookkeeping  and 
accounting,  and  the  practical  application  of  these  on  the  various  books  of  original  entry.  What  we 
mean  by  this  is  the  fact  that  there  are  debits  and  credits,  how  they  affect  accounts,  the  proper  classi- 
fication of  accounts,  the  best  method  of  recording  transactions  in  the  journal,  sales  book,  cash  book 
and  purchases  book;  the  method  of  posting  or  transferring  from  books  of  original  entry,  the  correct 
forms  of  the  Financial,  Trading,  and  Profit  and  Loss  statements,  and  the  method  of  closing  the  ledger 
by  the  use  of  red  ink.  In  addition  to  this  the  student  is  taught  the  importance  of  business  forms 
and  their  relation  to  business  transactions. 

The  second  set  is  intended  to  teach  the  principles  of  partnership  bookkeeping,  the  advantages 
of  special  ruling  in  the  cash  book,  the  carbon  copy  sales  book,  a  popular  form  of  the  purchases  book 
and  other  short  cut  methods  helpful  to  the  bookkeeper.  He  is  taught  the  advantage  of  special  accounts 
with  expense,  property  purchased  for  use  in  the  business  and  the  correct  classification  of  these.  The 
method  of  closing  the  ledger  by  journal  entries  is  thoroughly  explained  and  illustrated  arid  the  student 
is  given  sufficient  practice  to  enable  him  to  appreciate  the  advantages  of  this  method.  Supplemen- 
tary exercises  are  introduced  to  illustrate  the  principles  learned  and  to  enable  the  student  to  better 
understand  them. 

The  third  set  is  intended  to  teach  the  principles  of  corporation  bookkeeping,  the  special  accounts 
required  in  a  corporation  set  of  books,  special  ruling  in  all  books  of  original  entry,  special  or  con- 
trolling accounts,  the  modern  form  of  the  cash  journal  and  the  advantage  of  loose  leaf  books.  By 
transactions  in  the  work  and  supplementary  exercises,  he  is  taught  the  correct  entry  to  make  when 
two  corporations  consolidate  and  the  stock  of  one  is  issued  to  stockholders  of  the  other  in  payment 
for  the  stock  they  hold. 

The  student  who  has  completed  the  three  sets  has  a  broader  knowledge  of  bookkeeping  and 
accounting  than  can  be  obtained  from  any  other  complete  course  in  bookkeeping;  hence  he  is  better 
qualified  to  do  office  work. 


.vi.        .  ;ii.i\  \  PREFACE 

'/'<  V  [ih^ 'lp5i;-,t5T,''B?t  .tfeaches  the  principles  of  cost  accounting  as  practically  applied  in  modern  business, 
a  subject  that  has  never  before  been  presented  to  the  student  of  bookkeeping  and  accounting.  The 
transactions  are  so  arranged  that  the  student  devotes  practically  all  his  time  to  the  cost  feature, 
which  enables  him  to  obtain  a  thorough  understanding  of  the  principles  in  a  reasonably  short  time. 

The  student  learns  the  principles  of  bank  bookkeeping  by  acting  as  banker  for  those  students 
who  are  recording  the  transactions  outlined  in  the  bookkeeping  course.  In  this  capacity  he  must 
record  transactions  similar  to  those  recorded  by  the  various  clerks  in  the  bank.  The  course  is  espe- 
cially arranged  to  conduct  a  bank  in  connection  with  it.  This  arrangement  not  only  gives  the  student 
an  opportunity  to  learn  bank  bookkeeping  in  a  practical  manner,  but  relieves  the  teacher  of  much 
unnecessary  work,  such  as  entering  deposits,  issuing  New  York  Exchange,  certifying  checks,  entering 
discounted  notes,  etc.  It  is  not  necessary  to  conduct  a  bank,  but  the  teacher  is  advised  to  do  so, 
if  his  class  is  large  enough  to  make  sufficient  transactions  with  the  bank  to  keep  at  least  one  student 
busy  recording  them. 

Efficiency  in  office  routine  means  the  greatest  amount  of  work  with  the  best  results  at  the  least 
cost.  As  applied  to  the  work  of  the  bookkeeper  or  accountant,  it  means  the  ability  to  record  the  greatest 
number  of  transactions  with  correct  results  in  the  least  possible  time.  While  the  value  of  the  services 
of  the  bookkeeper  or  accountant  depends  largely  upon  his  knowledge  of  the  business  and  his  ability 
to  record  the  largest  number  of  transactions,  yet  a  thorough  knowledge  of  the  principles  of  accounting 
is  necessary  in  order  that  the  correct  results  may  be  obtained.  The  trouble  with  the  majority  of 
students  of  bookkeeping  and  accounting  is  that  they  have  the  impression  that  a  knowledge  of  the 
principles  is  sufficient.  While  this  knowledge  is  necessary,  yet  the  ability  to  put  it  into  practice  is 
even  more  necessary.  The  arrangement  of  this  work  is  to  teach  the  student  the  importance  of  each, 
and  give  him  such  a  thorough  drill  that  he  will  have  confidence  in  his  ability  to  do  the  work  and  get 
the  correct  results. 

The  teacher  must  know  that  the  student  thoroughly  understands  all  of  the  principles  explained 
in  the  text.  For  this  reason  we  have  prepared  supplementary  exercises  which  can  not  be  worked 
out  by  the  student  unless  he  does  understand  the  principles.  He  is  also  very  carefully  questioned 
on  each  section  of  the  work,  the  correct  answers  of  which  are  additional  evidence  to  the  teacher  that 
he  understands  the  explanations. 

In  addition  to  teaching  the  student  the  practice  of  recording  transactions  with  the  best  results, 
the  accounting  feature  is  presented  in  a  practical  way,  one  which  will  enable  him  to  appreciate  the 
importance  of  this  as  well  as  the  correct  record.  We  appreciate  the  fact  that  the  student  who  has 
completed  a  course  in  the  commercial  department  of  any  school  is  not  an  experienced  bookkeeper 
and  accountant,  but  believe  that  he  should  not  be  graduated  until  he  understands  the  practice  and 
theory  so  thoroughly  that  he  will  be  prepared  to  meet  the  conditions  required  by  modern  accounting. . 

The  student  who  has  worked  out  these  sets  need  not  hesitate  to  accept  a  position  in  any  office. 
He  can  feel  sure  that  his  work  will  meet  with  the  approval  of  practical  bookkeepers  and  accountants, 
and  that  it  will  not  be  necessary  for  his  employer  to  secure  the  services  of  an  expert  accountant  in 
order  to  outline  his  books  according  to  the  principles  of  modern  accounting. 

We  have  to  thank  the  many  commercial  teachers,  bookkeepers,  accountants,  and  business 
men  who  have  so  kindly  assisted  us  in  preparing  the  sets  and  thus  enabling  us  to  offer  to  the  teaching 
public  a  system  of  bookkeeping  and  accounting  that  meets  the  requirements  of  modern  business. 

THE  PUBLISHER. 


•   *  I 


INTRODUCTION. 


IN  HIS  primitive  state,  the  needs  of  man  were  very  few  and  each  individual  was  enabled  to  sup- 
ply all  his  wants,  thus  being  entirely  independent  of  his  fellow  beings.  But  with  the  growth  of 
civilization  there  was  a  corresponding  increase  in  those  things  necessary  to  man's  comfort  and 
enjoyment,  in  consequence  of  which  he  has  become  so  dependent  upon  those  around  him  that  at 
this  period  it  would  be  almost  impossible  for  him  to  exist  by  the  fruits  of  his  own  labor.  Thus  we 
find  this  great  world  inhabited  by  millions  of  human  beings,  each  working  and  laboring  for  both 
himself  and  those  around  him.  To  undertake  a  description  of  the  various  means  by  which  each  of 
these  individuals  obtains  those  things  necessary  for  his  comfort  and  enjoyment,  would  require  more 
time  and  space  than  we  care  to  devote  to  this  subject;  therefore,  for  convenience,  we  will  divide 
them  into  three  classes;  viz.,  Employees,  Professional  and  Business  Men. 

An  Employee  is  one  who,  for  a  compensation,  sells  his  time  (services)  to  another,  usually  at  a 
fixed  price.    Among  this  class  are  laborers,  mechanics,  carpenters,  engineers,  conductors,  clerks,  etc. 

A  Professional  Man  is  one  who  has  educated  himself  for  some  particular  line  of  work,  receiv- 
ing a  compensation  for  such  services,  usually  of  a  mental  nature,  as  he  may  be  able  to  render  others 
Among  this  class  we  find  physicians,  lawyers,  judges,  ministers,  teachers,  bookkeepers,  stenographers, 
etc. 

A  Business  Man  is  one  who  has  invested  property  in  some  enterprise,  hoping  to  be  able  to  in- 
crease the  value  of  the  same  by  exchanges  he  may  make.  He  supplies  those  in  need  of  the  property 
he  sells  or  services  he  renders.  The  successful  business  man  devotes  his  time,  as  well  as  his  property, 
to  the  enterprise  and  thus  derives  a  greater  profit. 

Investments  are  made  that  the  demands  of  the  people  may  be  supplied,  and  since  these  de- 
mands are  of  various  kinds,  it  is  evident  that  there  must  be  a  number  of  classes  of  business.  For 
convenience  these  are  divided  into  nine  different  classes;  viz..  Mining,  Manufacturing,  Mercantile, 
Transportation,  Communication,  Publication,  Insurance,  Banking  and  Farming. 

Mining.  Those  engaged  in  this  class  of  business  purchase,  with  the  property  invested,  the  land 
in  which  the  desired  mineral  ore  is  situated,  buy  machinery,  and  employ  the  necessary  help  to  re- 
move the  same  and  get  it  ready  for  the  market.  The  profit  is  derived  from  getting  a  better  price  for 
their  product  than  the  cost  of  producing  the  same.  This  class  of  business  men  usually  sells  to  the 
manufacturer  or  merchant  and  not  to  consumers. 

Manufacturing.  Those  engaged  in  this  business  take  the  raw  material  as  it  comes  from  the 
mines  or  other  original  sources,  and  change  its  form  that  it  may  be  better  suited  to  the  need  of  the 
consumer.  The  iron  ore,  as  it  comes  from  the  mines,  would  be  of  little  use  were  it  not  for  the  changes 
brought  about  by  the  furnaces  and  rolling  mills.  The  money  invested  is  used  in  purchasing  a  site 
and  buildings,  equipping  them  with  machinery,  and  employing  the  necessary  workmen.  That  the 
business  may  be  profitable,  the  goods  manufactured  are  sold  at  a  larger  price  than  the  cost  of  the 
raw  material,  labor  and  other  expenses.  The  manufacturer  usually  sells  to  the  merchant  or  other 
manufacturer,  but  in  some  cases  he  deals  directly  with  the  consumer.  Practical  examples  of  this 
line  of  business  are  rolling  mills,  steel  mills,  cotton,  woolen,  shoe  and  clothing  factories,  gas  and 
electric  plants,  lumber  mills,  etc. 

Mercantile.  In  this  business  the  property  invested  is  exchanged  for  the  various  kinds  of  mer- 
chandise, produce,  etc.,  that   the    public    demands,    either  as  a  means  of  support  or  as  a  luxury 


viii  .  INTRODUCTION. 


,Tbe5egoodg;arE  ^old'^t  a  higher  price  than  that  paid  for  them,  hence  produce  a  profit  to  the  seller. 
"Tiiei'e ^rfe  five'gerierdl  classes  of  merchants:  Wholesale,  Jobber,  Broker,  Commission  and  Retail. 

The  "Wholesale  Merchant  keeps  a  permanent  stock  of  goods  at  a  fixed  place  of  business  and 
solicits,  through  various  means,  the  trade  of  the  retail  merchant. 

The  Jobber  does  not,  as  a  rule,  carry  in  stock  the  goods  which  he  sells,  but  after  he  has  secured 
a  purchaser,  he  has  the  order  filled  by  some  wholesale  firm  or  manufacturer.  Sometimes  he  buys  a 
large  quantity  of  a  certain  class  of  goods  at  a  reduced  price,  then  solicits  the  trade  of  his  custom- 
ers until  they  are  sold.  No  definite  explanation  can  be  given  of  this  business,  as  it  is  conducted  in  so 
many  different  ways,  but  the  above  will  serve  as  an  illustration.  The  Jobber  deals  with  merchants 
and  not  consumers. 

The  Merchant  Broker  is  one  who  acts  as  an  agent  for  some  large  manufacturing  concern,  hav- 
ing charge  of  the  sales  of  its  products  in  some  particular  locality.  He  does  not  handle  the  goods,  but 
sells  direct  from  the  factory,  or  keeps  the  goods  in  storage,  to  be  delivered  as  sold.  Usually  all  col- 
lections are  made  direct  from  the  house  which  he  represents.  As  in  the  case  of  the  jobber,  the  expla- 
nation given  is  not  absolute,  but  only  serves  as  an  illustration,  the  customs  and  rules  varying  in  dif- 
erent  parts  of  the  country. 

The  Commission  Merchant  sells  the  goods  of  others  that  are  consigned  to  him.  He  has  a  per- 
manent place  of  business,  and  like  the  wholesale  merchant,  keeps  a  stock  on  hand  at  all  times.  Un- 
like him,  though,  he  does  not  purchase  these,  but  only  acts  as  agent  for  the  owner.  His  business  differs 
from  that  of  the  broker  in  that  he  represents  any  one  who  may  have  goods  to  sell.  While  all  classes 
of  goods  are  sold  by  the  commission  merchant,  fruits,  vegetables  and  produce  form  the  larger  part. 
His  profit,  like  that  of  the  jobber,  consists  in  a  certain  per  cent  of  the  sales.  They  are  similar  in  that 
they  both  sell  to  the  retail  merchant  and  not  to  the  consumer. 

The  Retail  Merchant  is  the  one  who  places  the  goods  into  the  hands  of  the  consumer.  His 
purchases  are  made  from  the  different  classes  of  merchants,  mines,  manufacturers  ajid  farmers.  His 
profits  arise  from  buying  at  one  price  and  selling  at  another.  There  are  more  persons  engaged  in 
the  mercantile  business  than  in  all  others  combined,  and  the  majority  of  these  persons  are  retailers. 

A  Mercantile  House  takes  its  name  from  the  class  of  goods  it  sells.  Thus  the  grocer  sells  gro- 
ceries and  provisions;  the  shoe  merchant,  shoes;  the  clothier,  clothing;  etc. 

Transportation.  All  the  commodities  necessary  for  the  support  of  any  one  locality  can  not 
be  produced  or  grown  there;  therefore,  some  means  must  be  provided  for  transporting  them.  As 
a  result  of  this,  capitalists  have  supplied  this  demand  by  providing  the  means.  Before  the  intro- 
duction of  steam,  this  was  brought  about  by  building  boats  to  navigate  the  natural  streams,  lakes 
and  oceans,  and  where  these  did  not  exist,  by  constructing  canals.  With  the  practical 
application  of  steam  and  electricity,  another  very  important  means  of  transportation  has 
been  added.  The  investment  in  this  business  is  used  in  providing  the  necessary  vessels  or  cars, 
in  paying  the  force  of  employees  to  operate  them,  and  in  meeting  other  expenses.  Unless  they  can 
get  a  greater  amount  for  transporting  the  goods  than  the  cost  of  carrying  them,  they  will  be  doing 
a  losing  business.  They  deal  with  all  classes  of  people  who  have  property  to  transport  or  wish 
to  use  their  cars  or  vessels  as  a  means  of  traveling.  Railroads,  express  companies,  electric  lines, 
steamboat  companies  and  steamships  are  the  principal  means  of  transportation  at  the  present  time. 

Communication.  In  all  civilized  countries  the  government,  through  its  mail  system,  has  pro- 
vided a  means  by  which  its  subjects  may,  from  a  distance,  communicate  one  with  another.  But  this 
is  far  too  slow  for  the  rush  of  modern  business,  and,  as  is  always  the  case,  when  there  is  a  demand 
there  is  a  means  of  supplying  it.  For  this  purpose  we  now  have  the  telegraph  and  telephone.  These 
companies,  for  a  consideration,  will  transport  messages  or  allow  communication  over  their  lines, 
thus  supplying  the  demands  of  the  public.  The  capital  invested  is  used  in  purchasing  poles,  wires, 
a  right  of  way,  and  in  employing  the  help  necessary  to  construct  the  line  and  serve  the  public.  The 
amount  charged  for  services  is  more  than  the  cost  of  operating  the  line,  this  excess  being  the  profit. 

Publication.    With  the  advancement  of  civilization,  comes  the  desire  to  know  the  events  trans- 


INTRODUCTION.  ix 


piring  in  different  parts  of  the  world,  as  well  as  local  happenings.  The  publication  of  books,  mag- 
azines, newspapers,  etc.,  not  only  supplies  the  above  demand  but  also  provides  reading  matter  for 
educational  purposes  and  amusement.  Recognizing  the  fact  that  the  public  will  always  pay  well 
for  these  things,  business  men  have  purchased  printing  presses,  paper  and  other  necessary  material, 
employed  those  skilled  in  this  class  of  labor  and  produced  those  books,  papers  and  magazines  for 
which  there  is  a  demand.  One  of  the  chief  sources  of  profit,  to  those  engaged  in  newspaper  and  mag- 
azine publication,  is  the  advertising.  Aside  from  this,  the  publisher  must  receive  more  for  his  pub- 
lications than  the  cost  of  material  and  labor  essential  to  their  production. 

Insurance.  One  of  the  greatest  risks  of  the  investors  in  a  business  is  that  of  destruction  by 
fire.  As  a  protection  against  this,  companies  have  been  organized  with  the  object  of  indemnifying 
the  owner  in  case  his  property  should  be  destroyed.  Only  a  small  per  cent  of  the  value  of  the  prop- 
erty is  charged,  the  profit  to  the  company  being  in  receiving  premiums  on  a  vast  amount  of  prop- 
erty which  is  never  destroyed.  It  distributes  the  loss  of  one  among  many.  The  capital  invested  is 
used  in  paying  those  losses  which  .occur  before  a  sufficient  amount  is  collected,  and  in  procuring 
business.  Wherever  there  is  a  risk,  there  will  be  a  company  organized  to  afford  protection  against 
the  same. 

Banking.  Those  engaged  in  this  line  of  business  deal  in  money  and  securities.  They  provide  a 
place  for  the  safe  keeping  of  money,  for  which  nothing  is  charged;  their  profits  arise  from  loaning 
this  money  and  that  invested,  receiving  the  interest  on  it.  In  some  countries,  the  banking  is  in 
charge  of  the  government,  but  in  the  United  States  it  is  conducted  by  any  person  or  persons  who 
have  the  money  and  wish  to  invest  it. 

The  Farmer  is  a  business  man  because  he  must  invest  money  in  the  business  and  the  amount 
of  his  profit  is  uncertain.  The  money  invested  is  used  to  purchase  land,  stock,  implements,  seed, 
labor,  etc.,  in  order  to  produce  the  material  for  sale.  Each  farmer  should  keep  a  correct  record  of 
all  amounts  invested,  the  cost  of  labor  and  returns  from  the  sale  of  the  products  of  his  farm,  so  that 
he  may  know  the  profit  for  the  year  just  the  same  as  any  other  business  man.  Even  the  farmer  who 
does  not  own  his  own  land,  but  cultivates  that  of  others,  is  a  business  man  because  he  must  pur- 
chase stock  and  invest  his  time  and  labor  in  the  enterprise. 

A  careful  analysis  of  the  above  shows  that  the  whole  business  world  is  linked  together  so  closely 
that  each  class  is  entirely  dependent  upon  the  others  for  existence.  The  manufacturer  buys  the  raw 
material  from  the  miner  and  changes  its  form  to  suit  the  needs  of  the  consumer.  The  merchant  buys 
from  the  manufacturer  and  miner  and  supplies  the  demands  of  the  consumer.  The  transportation 
company  moves  the  material  from  one  locality  to  another.  The  banker  supplies  the  necessary  capital 
for  conducting  business.  The  telegraph  and  telephone  companies  are  necessary  in  order  to  secure 
business.  Newspapers,  magazines  and  books  are  essential  to  all.  Each  depends  upon  the  farmer  for 
food  and  raw  material  for  clothing. 

As  regard s  the  number  of  investors  and  the  manner  of  organization,  there  are  three  classes  of 
business — individual,  partnership  and  corporation;  a  full  explanation  of  each  is  given  later  in  the  work. 

The  Object  of  all  Investment  in  business  is  for  gain — that  is,  an  increase  in  the  value  of  the 
property  invested.     It  now  remains  to  see  what  this  property  is  that  so  many  are  striving  for. 

Property  is  anything  of  value  belonging  to  a  person,  a  partnership  or  a  corporation.  The  busi- 
ness man  regards  it  as  money  or  anything  that  can  be  exchanged  for  money.  Money  is  the  medium 
of  exchange  and  measure  of  value  and  of  course  is  the  most  desirable  property. 

A  Resource.  Property  belonging  to  an  individual,  partnership  or  corporation  is  a  resource, 
and  all  the  property  belonging  to  a  business  is  its  resources.  Cash,  money  or  any  property  that  the 
bank  will  accept  as  money;  merchandise,  salable  goods  in  stock;  notes,  written  promises  of  others, 
and  personal  accounts,  verbal  promises  of  customers,  are  examples  of  the  resources  of  a  business. 

Liability.  When  property  is  purchased  and  not  paid  for  at  that  time,  the  business  becomes 
liable  for  this  amount.  All  the  debts  owed  by  the  business  are  its  liabilities.  Notes,  written  promises  to 
pay  others,  and  personal  accounts,  verbal  promises  to  pay  debts  created,  are  the  liabilities  of  a  business. 


INTRODUCTION. 


A  Profit  is  an  increase  in  the  value  of  property  invested  at  the  beginning  of  the  business  or  pur- 
chased afterwards.  In  a  mercantile  or  trading  business,  the  profit  is  brought  about  by  buying  mer- 
chandise at  one  price  and  selling  it  at  a  greater  price. 

A  Loss  is  a  decrease  in  the  value  of  the  property  invested  at  the  beginning  of  the  business  or  pur- 
chased afterwards.  If  the  total  losses  are  more  than  the  total  profits,  the  business  has  been  conducted 
at  a  loss. 

It  is  necessary  to  keep  a  full  record  of  all  property  received  and  exchanged  by  a  business.  This 
is  done  by  "Keeping  books."    There  are  two  methods  in  use — single  entry  and  double  entry. 

Single  Entry.  In  this  method  of  keeping  books  a  record  is  kept  only  of  property  received 
and  exchanged.  The  complete  record  shows  the  amount  of  money  received  and  paid,  the  amount  due 
each  person  or  firm  for  property  purchased  on  time,  the  amount  due  on  written  promises  to  pay  for 
goods  purchased,  the  amount  due  from  each  person  to  whom  goods  have  been  sold  on  time  and  the 
amount  due  on  written  promises  of  customers  to  pay  for  goods  purchased.  A  better  definition  is  given 
later  in  the  work,  after  the  student  understands  the  principles  of  bookkeeping  and  accounting. 

Double  Entry.  In  this  method  of  keeping  books,  the  record  shows  property  received  and  ex- 
changed, cost  of  conducting  the  business  and  the  profits  of  the  business.  It  is  based  on  the  principle 
that  each  transaction  involves  an  exchange  of  equal  value  and  the  record  must  show  the  value  of 
property  or  services  received  and  exchanged  in  each  transaction.  In  every  business  it  is  necessary 
to  exchange  property  for  services  in  conducting  the  business  and  very  often  property  is  received 
in  exchange  for  services  rendered  by  the  business.  The  double  entry  method  requires  a  record  of  prop- 
erty and  services;  the  single  entry  method  requires  a  record  of  property,  usually  only  personal  accounts. 

The  explanation  of  bookkeeping,  accounting  and  accounts  as  given  in  the  following  sections  re- 
fers to  the  double  entry  method. 

To  the  Student.  As  the  subject  of  bookkeeping  relates  almost  entirely  to  the  business  world, 
it  is  necessary  for  you  to  understand  the  nature  of  each  class  of  business.  If  you  can  answer  the  fol- 
lowing questions,  you  have  a  sufficient  knowledge  of  the  fundamental  principles  of  business  to  under- 
take to  keep  books. 

QUESTIONS. 


7- 


ID. 


II. 
12. 


Name  the  three  classes  of  people  who  earn 

their  own   living. 
Who  is  an  employee?     Give  an  example. 

Who    is    a    professional    man?      Give    an 

example. 
Who  is  a  business  man? 
Distinguish  between   an  employee  and   a 

business  man. 
Name     the    nine    principal    classes    into 

which  the  business  world  is  divided. 
Can  you  name  others  not  mentioned   in 

this  list? 
Explain   the   mining   business   and    name 

their  sources  of  profit. 
Name  two  or  more  classes  of  mines  and 

state  the  business  of  each. 
Name  two  or  more  classes  of  manufac- 
turers and  state  the  business  of  each. 
How  many  classes  of  merchants  are  there? 
Name  and  explain  the  business  of  each. 


13- 


14. 


15- 

16. 

17. 

18. 
19. 


20. 

21. 
22. 
23- 

24. 

25- 


Name  two  or  more  of  the  most  important 
transportation  companies  and  explain 
the  business  of  each. 

Give  an  example  illustrating  the  advan- 
tage of  telegraphy  to  the  business  world ; 
the  telephone. 

How  do  newspapers  and  publishing  com- 
panies make  money? 

How  do  insurance  companies  make  money? 

How  does  the  banker  make  money? 

Why  is  the  farmer  a  business  man? 

Why  is  each  class  of  business  dependent 
upon  some  one  or  more  of  the  other 
classes?     Can  you  give  an  example? 

Name  three  classes  of  business  as  regards 
their  organization. 

What  is  property? 

What  is  a  resource?  A  liability? 

What  is  the  object  of  "Keeping  books?" 
Name  the  two  methods. 

Define  the  single  entry  method. 

Define  the  double  entry  method. 


PART  I. 


BOOKKEEPING,    AUDITING,    ACCOUNTING,    BUSINESS    TRANSACTIONS    AND 

ACCOUNTS. 

The  complete  and  correct  history  of  the  transactions  made  in  any  business  is  discussed  in  the  sub- 
jects of  Bookkeeping,  Auditing  and  Accounting. 

§  1.  Bookkeeping.  Recording  business  transactions  in  properly  arranged  blank  books  is 
called  bookkeeping. 

The  object  is  to  show  a  complete  history  of  the  business;  that  is,  the  cash  received  and  paid, 
merchandise  bought  and  sold,  transactions  with  creditors  and  customers,  and  the  expense  necessary 
in  conducting  the  business. 

§  2.  Auditing.  Auditing  is  verifying  the  results  obtained  by  a  bookkeeper,  clerk,  agent,  or 
any  person  connected  with  the  business  whose  duties  are  to  record  transactions,  receive  or  pay  money, 
etc.  It  requires  a  thorough  knowledge  of  bookkeeping,  as  it  would  not  be  possible  to  verify  the  cor- 
rectness of  the  results  unless  the  one  who  is  doing  the  auditing  is  thoroughly  familiar  with  the 
manner  of  obtaining  these  results. 

§  3.  Accounting.  The  proper  classification  and  arrangement  of  accounts  so  that  the  best 
and  correct  results  may  be  shown  at  any  time  and  that  the  various  statements  made  at  the  close  of 
a  fiscal  period  will  show  the  true  results,  is  accounting.  * 

§  4.  A  Bookkeeper  is  one  who  understands  the  principles  of  double  entry  bookkeeping,  and 
has  a  sufficient  knowledge  of  business  routine  to  practically  apply  this  knowledge.  His  duties  may 
be  to  record  all  transactions  made  in  connection  with  the  business  or  a  part  of  them,  depending  entirely 
upon  the  number  of  transactions.  Thus  in  a  small  business,  where  only  one  office  man  is  necessary, 
he  can  keep  the  books,  make  the  bills  and  do  all  the  other  work  required  in  connection  with  recording 
transactions.  Where  the  business  is  larger  and  a  number  of  men  are  necessary  in  the  office,  one  may 
record  the  sales,  another  the  purchases,  another  cash  received   and  paid,  etc. 

§  5.  An  Auditor  is  one  who  verifies  the  results  of  the  bookkeeper,  cashier,  clerk,  agent,  or  any 
other  person  who  records  transactions,  receives  and  pays  money,  etc.  The  auditor  may  devote  his 
entire  time  to  auditing  for  the  firm  with  which  he  is  connected,  or  he  niay  audit  for  several  firms,  de- 
pending entirely  upon  the  number  of  transactions  recorded  in  any  one  business.  Thus  the  large  cor- 
porations, such  as  railroads,  express  companies,  telegraph  companies,  etc.,  employ  a  number  of 
auditors  whose  business  it  is  to  check  the  work  of  employees.  Where  the  business  is  small,  the  audit- 
ing can  be  done  by  an  auditor  or  accountant  who  does  special  work. 

§  6.  An  Accountant  is  one  who  has  had  sufficient  experience  in  bookkeeping  and  auditing 
to  enable  him  to  design  and  install  an  accounting  system  to  suit  the  conditions  in  any  particular  busi- 
ness, whether  it  is  mercantile,  banking  or  manufacturing.  The  accountant  must  have  a  thorough 
knowledge  of  the  principles  of  bookkeeping  and  accounting  and  have  a  wide  experience  in  the  prac- 
tical applications  of  these. 

§  7.  A  Certified  Public  Accountant  *(C.  P.  A.).  The  work  of  the  accountant  is  more  or  less 
confidential,  and  the  one  who  employs  him  has  no  means  of  knowing  his  ability  until  he  has  proVed 
it.  If  an  incompetent  accountant  is  employed  to  do  accounting  work,  the  results  are  sure  to  be  bad. 
In  order  to  avoid  impositions  by  those  who  are  not  qualified  to  do  accounting  work,  many  states  have 
passed  laws  requiring  those  who  do  public  accounting  work  to  pass  a  rigid  examination.     This  ex- 


12  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

amination  usually  requires  at  least  two  years'  experience  in  bookkeeping  or  accounting,  and  a  course 
in, some  school  of  accounting,  usually  the  one  under  the  directions  of  the  State  University.  The  person 
who  ha?  parsed  ^his  examination  is  known  as  "A  Certified  Public  Accountant."  The  fact  that  he  has 
p^sged  .this  exam.inatfpn  is  evidence  to  the  one  who  is  to  employ  him  that  he  is  qualified  to  do  the  re- 
q  u  ij  eid-woirk  ,,'.;.''•.,■ '  • 

It  will  be  seen  from  the  above  that  the  bookkeeper  records  the  transactions;  the  auditor  verifies 
the  correctness  of  this  record;  the  accountant  devises  systems  of  bookkeeping  and  accounting  es- 
pecially arranged  to  suit  the  conditions  in  any  line  of  business.  The  student  who  knows  nothing 
of  the  subject  must  first  learn  the  fundamental  principles  of  bookkeeping  and  accounting. 
When  he  is  thoroughly  familiar  with  these,  and  has  acquired  sufBcient  experience  in  actual  business 
to  understand  the  practical  application  of  these  subjects,  he  may  advance  to  the  position  of  auditor, 
and  later  to  that  of  an  accountant. 

Since  the  principal  work  of  the  bookkeeper  is  recording  business  transactions,  it  is  necessary  for 
the  beginner  to  have  a  thorough  knowledge  of  what  constitutes  a  transaction,  and  the  different  kinds 
of  transactions  that  may  occur  in  business. 

§  8.  A  Business  Transaction.  A  transaction  is  an  exchange  by  which  the  nature  of  the  busi- 
ness is  affected.    The  usual  transactions  that  occur  in  any  mercantile  or  trading  business  are  as  follows: 

First:  an  exchange  of  property  for  property.  Second:  an  exchange  of  credit  for  property,  that 
is,  property  purchased  on  time.  Third :  an  exchange  of  property  for  credit,  that  is,  a  sale  of  property 
on  time.  Fourth:  property  given  in  payment  of  an  obligation.  Fifth:  property  received  in 
payment  of  a  debt.  Sixth :  an  exchange  of  property  for  services.  Seventh :  an  exchange  of  services 
for  property. 

§  9.  An  Exchange  of  Property  for  Property.  In  this  class  of  transactions,  property  is  re- 
ceived and  property  given  in  exchange  for  it.  Unless  the  property  received  is  of  a  different  nature 
from  that  exchanged,  the  business  would  not  be  affected,  hence  no  record  is  necessary.  Thus,  if  a 
customer  buys  a  p^ir  of  shoes  for  $4.00  and  gives  in  exchange  $4.00  in  money,  this  is  a  transaction, 
because  property  is  given  for  property,  and  must  be  recorded,  as  the  money  is  a  different  kind  of 
property  from  the  goods  exchanged.  If  later  the  customer  returns  the  shoes  and  exchanges  them  for 
another  pair  of  the  same  price,  no  record  is  made  because  the  property  received  is  of  the  same 
kind  as  that  given.  J^   -'^  , 

§  10.  An  Exchange  of  Credit  for  Property.  If  the  buyer  does  not  have  the  property  to 
give  in  exchange  for  that  which  he  purchases,  and  the  seller  will  allow  him  to  take  possession  of  it 
and  make  payment  at  some  future  time,  the  purchaser ' gets  property,  but  gives  nothing  in  return. 
This  class  of  transactions  is  very  popular  in  business,  because  much  of  the  property  purchased  by 
the  average  merchant  is  not  paid  for  until  some  future  date.  Credit  is  extended  because  the  seller 
has  confidence  in  the  purchaser.  The  amount  of  credit  allowed  a  business  depends  upon  the  prompt- 
ness with  which  its  debts  are  paid  and  the  value  of  its  resources.  A  number  of  associations  have  been 
formed,  the  object  of  which  is  to  determine  the  amount  of  credit  allowed  to  merchants.  This  is  a 
special  business  and  will  be  explained  later. 

§11.  An  Exchange  of  Property  for  Credit.  This  class  of  transactions  is  the  opposite  of  that 
described  in  §  10;  that  is,  the  business  allows  its  property  to  go  out  without  receiving  any  property  in 
return.  It  extends  credit  to  its  customers  just  the  same  as  credit  is  extended  to  it.  The  same  rule 
applies  relative  to  the  amount  of  credit  allowed. 

§  12.  Property  Given  in  Payment  of  an  Obligation.  In  this  class  of  transactions  those 
described  in  §  10  are  canceled  by  fulfilling  the  contract.  The  property  which  would  have  gone 
out  at  the  time  the  purchase  was  made,  if  credit  had  not  been  extended,  is  now  given  in  payment  of 
the  obligation.  The  number  of  transactions  of  this  nature  may  not  be  the  same  as  the  number  de- 
scribed in  §  10,  as  several  obligations  may  be  paid  by  one  exchange. 

§  13.  Property  Received  in  Payment  of  a  Debt.  This  class  of  transactions  completes  those 
described  in  §  11,  and  represents  the  property  that  should  have  been  received  if  credit  had  not  been 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  13 

extended.  As  described  in  §  12,  there  may  not  be  as  many  transactions  of  this  nature  as  in  §  11,  be- 
cause the  customer  may  pay  several  debts  at  one  time.  On  the  other  hand,  there  may  be  more,  as  he 
might  not  pay  all  of  an  obligation  at  one  time. 

§  14.  Exchange  of  Property  for  Services.  The  business  man  must  pay  his  employees  for 
their  services;  the  telephone  company  for  the  use  of  his  'phone;  the  insurance  company  for  the  pro- 
tection it  affords;  the  banker  for  the  use  of  money  borrowed  from  him;  the  owner  of  the  property  in 
which  he  does  business,  for  the  use  of  the  same;  various  other  services  necessary  to  successfully  con- 
duct his  business.  In  each  of  these  transactions  some  property  goes  out,  but  nothing  tangible  is  re- 
ceived in  return.  It  is  true  that  he  gets  value  for  his  property,  but  it  is  of  an  entirely  different  nature 
from  that  received  in  §§  9,  10,  11  and  13. 

§  15.  An  Exchange  of  Services  for  Property.  This  class  of  transactions  is  more  frequent 
with  those  engaged  in  transportation,  communication,  publication,  insurance  and  banking,  as  the 
larger  part  of  their  receipts  are  for  services  rendered.  In  the  average  mercantile  or  trading  business, 
there  will  not  be  very  many  transactions  of  this  nature,  as  the  object  of  the  business  is  to  purchase 
goods  and  sell  them  at  a  profit,  rather  than  render  services  to  customers. 

The  beginner  should  study  this  outline  of  transactions  and  be  sure  that  he  understands  the  nature 
of  each.  A  thorough  knowledge  of  bookkeeping  depends  largely  upon  a  clear  understanding  of  the 
transaction  and  the  effect  it  has  upon  the  business.  It  is  quite  evident  that  all  transactions  of  the 
same  nature  should  be  recorded  in  the  same  way,  and  as  there  are  only  seven  different  classes  given, 
this  simplifies  the  record.  In  order  that  the  correct  results  may  be  shown  by  recording  transactions, 
it  is  necessary  to  use  accounts. 

§  16.  An  Account  is  a  Record  of  all  the  transactions  with  any  one  person,  any  one  particular 
kind  of  property,  services  or  revenue.  As  a  record  is  to  be  kept  of  the  goods  sold  on  time,  it  is  neces- 
sary to  have  an  account  with  each  person,  that  is,  a  record  of  all  the  transactions  with  that  person. 
As  goods  are  purchased  and  sold,  it  is  necessary  to  have  a  complete  record  of  all  the  purchases  and 
sales.  As  money  is  to  be  received  and  paid,  it  is  necessary  to  have  a  record  of  all  the  transactions 
with  money.  As  services  must  be  purchased,  a  complete  record  of  all  services  under  proper  names 
must  be  kept.  Accounts  are  named  in  accordance  with  the  nature  of  the  property,  service  or  revenue 
which  they  represent.  Money  is  usually  termed  Cash;  goods  purchased  for  sale.  Merchandise;  money 
paid  for  conducting  the  business,  Expense;  money  paid  for  use  of  money.  Interest;  dealings  with  per- 
sons or  firms.  Personal  Accounts,  each  account  bearing  the  name  of  the  person  or  firm. 

^  I.  When  an  Account  is  opened  with  any  particular  kind  of  property,  service,  or  revenue,  it  is 
necessary  to  keep  a  correct  record  of  all  the  transactions  with  it,  or  the  correct  results  will  not  be 
shown.  Thus  if  money  received  is  placed  in  a  certain  position  in  the  Cash  account  at  one  time,  and 
in  the  same  position  in  the  Merchandise  account  at  another  time,  neither  of  these  accounts  would 
be  correct,  because  property  of  the  same  nature  has  been  made  to  affect  two  different  accounts. 
The  student  must  understand  this  at  the  beginning,  and  know  that  each  account  must  show  the  com- 
plete history  of  all  the  transactions  with  the  property,  revenue,  or  service  named  by  the  account. 

§  17.  Debits  and  Credits.  All  accounts  are  affected  in  two  ways,  one  opposite  to  the  other. 
The  reason  for  this  is  because  each  transaction  affects  the  business  in  two  ways;  it  represents  an  ex- 
change of  equal  values.  Thus  when  money  is  received,  the  account  representing  it  (Cash)  is  affected 
in  one  way;  when  money  is  paid,  this  account  is  also  affected,  but  in  an  entirely  different  way.  When 
a  person  purchases  property  from  the  business  on  time,  his  account  is  affected  in  one  way;  when  he 
pays  for  this,  his  account  is  also  affected,  but  in  an  entirely  different  way.  For  this  reason,  accounts 
are  divided  into  two  sides,  one  showing  the  value  of  the  property  when  it  is  received,  and  the  other 
the  value  of  the  property  when  it  goes  out.  For  convenience,  these  are  named  Debit  and  Credit.  Thus 
the  debit  side  of  a  Property  account  shows  that  property  has  been  received,  and  the  credit  side  shows 
that  some  of  this  property  has  been  disposed  of.  The  form  of  the  two  sides  is  of  necessity  the  same, 
because  the  transactions  are  the  same,  except  they  affect  the  account  in  a  different  manner.  A  care- 
ful study  of  illustrations  Nos.  1-7  will  make  this  clear  to  the  student. 


14  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

§  18.  The  Difference  Between  the  Two  Sides  of  an  Account  will  show  the  value,  and  is 
usually  termed  the  balance.  Thus,  if  all  the  money  received  is  entered  on  the  debit  side  of  the  Cash 
account,  and  all  the  money  paid,  on  the  credit  side,  the  difference  is  the  amount  of  money  on  hand. 
If  a  person  is  charged  (debited)  with  each  purchase,  and  credited  with  the  money  received  from  him, 
the  difference  is  the  amount  he  owes.  If  the  Expense  account  is  debited  with  all  of  the  money  paid 
for  services,  and  credited  for  anything  that  may  have  been  received  to  offset  these  services,  the  differ- 
ence is  the  expense  of  conducting  the  business.  If  the  Interest  account  is  debited  for  all  the  money 
paid  for  interest,  and  credited  with  all  the  money  received  for  interest,  the  difference  is  the  net  amount 
of  money  paid  or  received  for  interest. 

§  19.  Negative  Accounts.  The  balance  of  each  account  should  show  either  a  resource,  a 
liability,  a  loss  or  a  gain.  Since  the  resources  or  assets  of  the  business  consist  of  property  belonging 
to  the  business,  the  balance  of  a  resource  account  must  be  the  value  of  some  property.  If  the  bal- 
ance does  not  show  the  true  value  of  the  property,  it  is  necessary  to  open  a  negative  account  that 
shows  the  depreciation;  this  is  termed  a  negative  account.  Thus  property  purchased  for  use  in  the 
business  will,  of  necessity,  decrease  in  value.  Accounts  due  from  customers  will  not  all  be  collected; 
notes  accepted  by  the  business  in  payment  for  obligations  due  from  customers  may  not  be  paid  in  full. 
If  the  true  value  of  the  resources  is  to  be  shown,  it  is  necessary  to  take  this  into  consideration  at  the 
time  the  Financial  statement  is  made.  In  order  to  make  each  account  show  its  true  value,  a  reserve 
for  depreciation  account  is  opened,  and  credited  with  the  amount  that  shows  the  decrease  in  value 
of  the  property. 

§  20.  Classification  of  Accounts.  The  proper  classification  of  accounts  is  the  most  import- 
ant feature  in  bookkeeping  and  accounting.  Unless  the  accounts  are  properly  classified,  the  correct 
result  will  not  be  shown,  even  though  each  account  does  contain  a  history  of  all  the  transactions,  with 
some  particular  kind  of  property,  service,  or  revenue.  Each  account  has  a  certain  relation  to  the  busi- 
ness as  a  whole,  and  must  represent  a  certain  number  of  units  of  value.  The  account  representing 
the  most  number  of  units  of  value  in  one  business,  might  not  have  the  same  relation  in  another  busi- 
ness. The  student  of  bookkeeping  and  accounting  can  not  appreciate  the  value  of  this  statement 
until  he  has  had  some  practical  experience  in  keeping  books  or  classifying  accounts.  However,  he 
must  always  keep  in  mind  the  fact  that  each  account  must  show  a  certain  number  of  units  of  infor- 
mation, and  that  the  nature  of  the  business  will  determine  the  information  that  the  different  accounts 
must  show. 

In  the  average  trading  or  mercantile  business,  will  be  found  six  classes  of  accounts  as  follows:  Re- 
sources or  Assets;  Liabilities;  Revenue  or  Trading;  Operating;  Special  Profits  and  Losses;  Investment. 

§  21.  Resources  or  Assets.  A  Resource  or  Asset  account  shows  the  value  of  some  property 
belonging  to  the  business.  All  of  the  Resource  or  Asset  accounts  show  the  total  value  of  the  prop- 
erty or  assets  of  the  business.  Since  property  is  purchased  for  two  different  purposes,  there  are 
really  two  kinds  of  Resource  or  Asset  accounts;  one  to  show  the  value  of  property  brought  about 
by  the  purchase  and  sale  of  merchandise;  the  other,  the  value  of  property  bought  to  be  used  in  the 
business,  and  not  for  sale.  The  former  is  termed  the  "Active  or  Current  Assets,"  and  the  latter,  the 
"Fixed  Assets"  or  "Fixed  Investments." 

^  I.  Active  or  Current  Assets.  The  object  of  these  accounts  is  to  show  the  value  of  property 
belonging  to  the  business  which  was  brought  about  by  the  purchase  and  sale  of  merchandise.  This 
property  is  usually  represented  by  the  following  accounts:  Cash;  Merchandise  Inventory;  Notes 
Receivable;  Accounts  Receivable;  Shipments;  Securities  owned;  Treasury  Stock;  Installment  Con- 
tracts. As  some  of  these  resource  accounts  may  not  show  the  true  value  of  the  property,  it  may  be 
necessary  to  have  negative  or  reserve  accounts  as  follows:  Reserve  for  bad  debts;  Reserve  for  bad 
notes;  Reserve  for  loss  or  canceled  sales. 

The  above  accounts  are  listed  in  the  order  of  their  availability,  and  should  appear  in  the  Financial 
statement  in  the  order  given. 

^  2.     Fixed  Assets.     The  object  of  these  accounts  is  to  show  the  value  of  property  purchased 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  15 

for  use  in  the  business,  but  not  for  sale.  In  every  business  it  is  necessary  to  purchase  this  class  of 
property.  The  merchant  must  have  the  proper  equipment  in  his  office  and  store  room;  the  railroad 
company  must  have  cars  and  engines  for  hauling  freight  and  passengers,  mail  and  express;  the  tele- 
graph company  must  have  telegraph  instruments,  wires,  office  equipment  and  other  property  neces- 
sary for  the  successful  conducting  of  the  business.  In  the  average  trading  or  mercantile  business, 
the  following  accounts  usually  represent  the  fixed  investments:  Land;  Buildings;  Real  Estate;  Store 
Fixtures;  Office  Equipment;  Furniture  and  Fixtures;  Delivery  Equipment;  Interior  Alterations; 
Good  Will;  Sinking  Fund.  Since  most  of  the  property  purchased  for  use  in  the  business  will,  of 
necessity,  decrease  in  value  on  account  of  its  use,  it  is  necessary  to  have  a  Negative  or  Reserve  ac- 
count to  show  the  amount  of  the  decrease. 

In  the  above  classifications  there  would  be  the  following:  Reserve  for  Depreciation  on  Office 
Equipment,  Store  Fixtures,  Furniture  and  Fixtures,  Delivery  Equipment,  Buildings.  The  land 
would  not  decrease  in  value. 

^  3.  At  the  Close  of  the  Fiscal  Period  there  may  be  some  property  on  hand  that  is  not  shown 
on  the  books.  This  might  be  interest  accrued  on  notes  or  accounts  due  the  business;  prepaid  rent, 
telephone  services,  paid  in  advance;  unexpired  insurance,  etc.  These  are  usually  represented  on  the 
Financial  statement  by  a  Sundry  Resource  Inventories  account;  and  after  the  ledger  is  closed,  they 
are  entered  on  the  debit  side  of  the  service  account,  which  they  represent. 

§  22.  Liabilities.  The  object  of  these  accounts  is  to  show  the  obligations  owed  by  the  business. 
As  a  general  rule,  there  are  only  two  classes  of  indebtedness:  one  is  verbal  promises  (trade  creditors), 
the  other,  written  promises  (notes  payable). 

^  I.  At  the  Close  of  the  Fiscal  Period  there  may  be  a  number  of  outstanding  obligations  that 
are  not  shown  on  the  books,  such  as  accrued  interest  on  notes  or  accounts  owed  by  the  business ;  pay 
roll  earned  by  employees,  but  not  paid ;  rent  due,  but  not  paid ;  and  various  other  small  obligations. 
These  are  usually  represented  on  the  Financial  statement  by  a  Sundry  Liability  Inventories  account; 
and  after  the  ledger  is  closed,  they  are  entered  on  the  credit  side  of  the  service  account,  which  they 
represent. 

§  23.  Income  or  Revenue  Accounts.  The  object  of  these  accounts  is  to  show  the  profit 
derived  from  the  sale  of  property  or  services.  These  are  usually  represented  by  the  following:  Mer- 
chandise Sales  or  Sales  of  each  Department;  Income  from  Securities  owned;  Commission;  Income 
from  Rents;  Miscellaneous  Income. 

§  24.  Operating  Accounts.  It  is  necessary  to  keep  a  record  of  all  the  property  transferred 
in  payment  for  services  rendered  the  business,  which  are  usually  termed  the  "Expenses."  The  ex- 
penses of  the  business  may  be  divided  into  two  general  classes:  General  Administrative  Expense 
and  Selling  Expense.  The  general  administrative  expense  refers  to  amounts  paid  for  conducting  the 
business,  such  as  rent,  bookkeepers'  and  stenographers'  salaries,  officers'  salaries,  heat,  light,  etc. 
The  selling  expense  refers  to  amounts  paid  for  securing  sales.  The  following  accounts  are  usually  rep- 
resented in  each  class: 

^  I.  General  Administrative  Expense  may  be  represented  by  one  account,  or  such  accounts  as, 
Officers' Salaries;  Office  Expense;  Office  Supplies;  Directors'  Fees;  Insurance  on  Office  Equipment; 
Rent;  General  Postage;  Legal  Advice;  Heat;  Light;  Depreciation  on  Office  Equipment;  Office  Supplies 
used;  Repairs  on  Office  Equipment;  Incidentals. 

\  2.  Selling  Expense  may  be  represented  by  one  account,  or  such  accounts  as.  Advertising;  Sales- 
men's Salaries;  Agents' Commissions;  Traveling  Expense;  Credit  Man's  Salary;  Clerk  Hire  in  the 
Sales  Department;  Freight  Out;  Drayage  or  Delivery  Expense;  Shipping  Department  Expense; 
Postage  in  the  Selling  and  Advertising  Department;  Depreciation  on  Delivery  Equipment. 

§  25.  Special  Profit  or  Loss  Accounts.  These  include  those  losses  and  gains  not  brought 
about  by  the  purchase  and  sale  of  goods,  such  as  Interest,  Discount,  Loss  on  Bad  Debts,  Commission. 
They  appear  on  the  Profit  and  Loss  statement,  after  the  other  losses  and  gains,  §§  23  and  24,  have  been 
considered. 


i6 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  26.  Investment  Accounts.  The  object  of  these  accounts  is  to  show  the  investment  at  the 
beginning  of  the  business,  subsequent  investments  and  accumulated  profits.  The  investment  may 
be  made  by  one  person,  two  or  more  persons  acting  under  a  partnership  agreement,  or  three  or  more 
persons  associated  together  as  a  corporation.  Separate  accounts  may  be  kept  with  amounts  invested 
and  withdrawn  from  the  investment,  and  with  the  profits  accumulated,  or  the  profit  may  be  credited 
to  the  investment  account.  The  investment  account  in  an  individual  or  partnership  business  is  given 
the  name  of  the  individual  or  owner,  or  each  partner,  the  word  "Capital"  being  written  after  the 
name  to  indicate  that  it  is  the  investment  account.  As  stated,  the  accumulated  profit  may  be 
credited  to  this  account  at  the  close  of  the  fiscal  period;  if  not,  a  surplus  account  is  opened, 
and  this  shows  the  amount  of  the  profit,  unless  a  part  or  all  of  it  is  withdrawn.  When  the  business 
is  conducted  as  a  corporation,  the  profit  is  always  closed  into  a  Surplus  account,  and  not  into  the 
Capital  Stock  account,  which  shows  the  investment. 

The  beginning  student  is  not  expected  to  understand  the  above  classification  and  use  of  the 
various  accounts  mentioned.  These  will  be  referred  to  as  the  account  is  introduced,  and  a  further 
explanation  given  of  each.  However,  he  should  understand  that  the  difference  of  each  account  must 
show  a  resource,  a  liability,  a  loss,  or  a  gain,  and  in  the  case  of  property  accounts,  where  the  difference 
does  not  show  the  true  value,  a  negative  or  reserve  account  must  be  opened  to  show  the  depreciation. 


QUESTIONS. 


2. 

3- 
4 

5- 

6 
7 


ID 


II 


12 


13 


14. 

15- 


16 


Define  bookkeeping  and  state  its  object. 

(§  I.) 
Define  auditing.     (§  2.) 
Define  accounting.     (§  3.) 
State   the   duties  of  the   bookkeeper;   the 

auditor;  the  accountant.     (§§  4-6). 
Who    is    a    Certified    Public  Accountant? 

(§  7.) 

Define  a  business  transaction.     (§  8.) 

What  is  meant  by  an  exchange  of  property 
for  property?     (§  9.) 

What  is  meant  by  an  exchange  of  credit 
for  property?     (§  10.) 

What  is  meant  by  an  exchange  of  prop- 
erty  for  credit?      (§  11.) 

What  is  meant  by  property  given  in 
payment  of  obligations?     (§  12.) 

What  is  meant  by  property  received  in 
payment  of  a  debt?     (§  13.) 

Why  is  it  necessary  for  a  business  man  to 
exchange  property  for  services?     (§  14.) 

Name  some  of  the  classes  of  business  in 
which  the  majority  of  the  transactions 
involve  an  exchange  of  services  for  prop- 
erty.    (§  15.) 

Define  an  account.     (§  16.) 

What  is  meant  by  debit  and  credit  and 
why  is  it  necessary  to  debit  and  credit 
an  account?     (§  17.) 

What  is  meant  by  ''the  difference"  of  an 
account?     (§  18.) 


19. 


20. 


21. 


22. 


23- 
24. 

25- 

26. 


27. 


28. 


29. 


30. 


Why    are    negative    accounts    necessary? 

(§19.) 

What  is  meant  by  classification  of  ac- 
counts? (§  20.) 

What  are  resource  or  asset  accounts? 
(§21.)^ 

Distinguish  between  active  or  current  as- 
sets and  fixed  assets.     (§21    ^^  i — 2.) 

What  kind  of  property  may  be  on  hand 
at  the  time  the  books  are  closed  and  not 
shown  on  the  books?     (§21,  1  3.) 

What  are  the  liabilities  of  a  business  and 
into  how  many  classes  are  they  divided? 
(§  22.) 

What  is  a  Sundry  Liability  Inventories 
account?.     (§  22    Tf  i.) 

What  are   Income   or   Revenue   accounts? 

(§  23.) 
What  are  Operating  accounts?     (§  24.) 
Name  some  of  the  accounts  that  represent 

the     general     administrative      expense. 

(§  24,  H  I.) 

Name  some  of  the  accounts  that  represent 
the  selling  expense.     (§  24,  •[[  2.) 

Name  three  of  the  special  profit  and  loss 
accounts.     (§  25.) 

What  is  the  object  of  the  Investment 
account?     (§  26.) 

What  should  the  difference  of  each  ac- 
count show?     (§  26.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


17 


EXERCISES  IN  ACCOUNTS. 

The  following  accounts  are  those  introduced  in  the  January  work,  and  it  is  necessary  for  the  stu- 
dent to  understand  the  object  of  each,  the  various  debits  and  credits  that  may  arise,  the  value  of  the 
difference,  and  the  method  of  closing  and  ruling.  These  exercises  should  be  worked  out  before  any 
transactions  are  recorded. 

CASH  ACCOUNT. 

§  27.  The  Object  of  this  Account  is  to  show  a  record  of  all  cash  received  and  paid.  Cash  is 
money  or  any  commercial  paper  that  the  banks  will  accept  at  the  face  value  as  money.  The  latter 
includes  personal  checks,  bank  drafts,  cashier's  checks,  postoffice  and  express  money  orders,  etc. 
(§  100,  ^H  1—6.) 

As  a  general  rule,  the  cash  account  is  not  kept  in  the  ledger,  but  in  a  separate  book  termed 
"Cash  Book."    The  reason  for  this  is  because  of  the  large  number  of  transactions  affecting  cash. 

The  Cash  Account  is  Debited:  The  Cash  Account  is  Credited: 

Tf  I.     For  the  balance  of  cash  on  hand  at  the         ^3.     For  all  money  paid. 

beginning  of  the  business.  ^  4.     For  all  checks  written. 

^  2.     For  all  cash  received. 

*I[  5.  The  Balance  of  this  Account  will  show  the  amount  of  cash  on  hand;  this  may  be  in  the  safe, 
in  the  bank,  or  a  part  in  each  place.  Cash  is  a  resource,  and  must  appear  first  on  the  Financial  state- 
ment because  it  is  the  most  available  of  all  the  resources. 

^  6.  To  Close  the  Cash  Account.  Add  the  two  sides  and  enter  the  totals  in  small  pencil  figures 
as  shown  in  illustration;  write  on  the  credit  side,  in  red  ink,  the  date  of  closing,  the  word  "Balance," 
the  page  in  the  ledger  where  this  balance  is  to  appear,  and  the  amount  of  the  cash  balance,  which  is 
the  difference  between  the  two  sides.  Rule  the  account  with  single  and  double  lines,  using  red  ink. 
Write  the  totals  of  each  side  in  black  ink,  between  the  single  and  double  lines.  On  the  debit  side, 
either  on  the  same  page  or  a  new  page,  write,  with  black  ink,  the  date,  which  will  be  that  of  the  day 
following  the  closing,  the  word  "Balance,"  the  page  of  the  cash  account,  and  the  amount  of  the  bal- 
ance. If  the  balance  is  brought  down  on  the  same  page,  it  is  written  on  the  first  blue  line  below  the 
double  lines,  and  a  check  mark  is  placed  in  the  page  column.    See  illustration  No.  i. 

The  same  instructions  apply  to  ruling  the  cash  book.    This  will  be  explained  later. 


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Illustration  No.  i.    Cash  Account  for  January. 


i8  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

EXERCISES  IN  THE  CASH  ACCOUNT. 

Prepare,  on  ledger  paper,  a  Cash  account  for  each  of  exercises  Nos.  i,  2  and  3.  Illustration 
No.  I  is  the  same  as  exercise  No.  i.  The  figures  in  the  page  column  (the  one  on  the  left  of  the 
amounts)  are  not  to  be  used  by  the  student.  The  various  transactions  will  illustrate  the  special  debits 
and  credits  described  in  §  27,  ^^  i,  2,  3  and  4.  References  are  not  given  in  every  case,  but  only 
in  those  cases  where  the  student  may  be  in  doubt  as  to  the  reason  for  the  debit  or  credit.  Full  in- 
structions regarding  ruling  and  the  use  of  the  rule  are  given  in  §  73,  ^^  i— 3- 

The  student  should  be  provided  with  ledger  paper  ruled  similar  to  illustration  No.  i,  as  it  will 
require  too  much  time  to  rule  blank  paper. 

EXERCISE  No.  i.  January  ist,  invested  $2,000.00  in  cash  (^  i);  4th,  paid  $20.00  for  city  H- 
cense  (^3);  5th,  paid  City  Milling  Co.  $192.00  for  flour  (][  3) ;  6th,  cash  sales,  $30.00  (^  2);  6th,  paid 
Borches  &  Co.  $77.30,  in  full  of  account  (T[  3) ;  9th,  received  $10.00  from  A.  R.  Jennings  (][  2);  12th, 
received  $30.00  from  Central  Hotel  (^  2) ;  13th,  cash  sales,  $40.00  (^  2) ;  13th,  paid  Kaiser  Bros. 
$100.00  (^[3);  i8th,  received  $35.00  from  M.  A.  Johnson  (^  2);  20th,  paid  Kaiser  Bros.  $34.95  (^  3); 
20th,  cash  sales,  $50.00  (T[  2) ;  24th,  received  $15.00  from  Central  Hotel  (Tj  2) ;  24th,  paid  Hazen 
Lotspeich  $125.00  (^  3) ;  26th,  received  $4.25  from  A.  R.  Jennings  (^f  2) ;  27th,  cash  sales,  $42.50  (T[  2) ; 
29th,  received  $50.00  from  C.  L.  Loyd  (^  2) ;  30th,  paid  Borches  &  Co.  $150.00  (^  3) ;  31st,  paid  sundry 
expenses,  $60.00  (T[  3) ;  cash  balance,  January  31st,  $1,547.50. 

EXERCISE  No.  2.  February  ist,  invested  $2,500.00  in  cash  (^  i);  ist,  paid  $1,186.45  fo^  "ler- 
chandise  (1[  3) ;  3d,  paid  rent,  $40.00;  3d,  paid  salaries,  $30.00;  4th,  received  from  Oxford 
Hotel,  $100.00  (^  2) ;  4th,  paid  $50.00  for  scales  (^  3) ;  4th,  paid  $350.00  for  team  of  horses  and  wagon ; 
5th,  cash  sales,  $327.56  (1[  2) ;  6th,  gave  the  Hall  Safe  Company  check  for  $150.00,  for  safe 
(^[4);  7th,  cash  sales,  $175.46;  7th,  paid  driver,  $18.00  (T|  3) ;  8th,  paid  telephone  rent,  $10.00; 
8th,  received  from  Oxford  Hotel,  $150.00;  loth,  cash  sales,  $95.00;  loth,  paid  $25.00  for  office  desk; 
loth,  paid  $237.50  for  merchandise;  nth,  cash  sales,  $156.75;  12th,  received  from  Chas.  C.  Lundy, 
$40.00;  I2th,  gave  Jones  Bros,  a  check  in  payment  for  merchandise,  $62.85;  12th,  received  from 
Robert  A.  Dow,  $25.00;  13th,  cash  sales,  $297.36;  13th,  paid  sundry  expenses,  $38.50.  Balance  on 
hand  February  13th,  $1,668.83. 

EXERCISE  No.  3.  March  ist,  invested  $3,500.00  in  cash  (^  i) ;  ist,  paid  by  check  for  team  and 
wagon,  $300.00  (^  4) ;  1st,  paid  by  check  for  office  and  store  fixtures,  $650.00;  2d,  cash  sales,  $304.87; 
2d,  paid  cash  for  merchandise,  $1,500.00;  2d,  received  from  Caleb  Barber,  $50.00;  3d,  paid  sundry 
expenses,  $127.00;  4th,  paid  $150.00  for  safe;  7th,  received  from  O.  H.  Arnold,  $64.00;  7th,  cash  pur- 
chase, $330.75  (^3);  8th,  cash  sales  of  merchandise,  $204.18;  9th,  received  from  H.  F.  Ritter, 
$15.00;  9th,  cash  purchase,  $28.65;  nth,  cash  sales,  $264.85;  13th,  received  f'"0"^  O-  B-  Donaldson, 
$50.00;  14th,  cash  sales,  $15.79;  14th,  gave  Belknap  Hardware  Co.  a  check  for  $629.87;  14th, 
paid  sundry  expenses,  $72.50;  14th,  paid  C.  R.  Crawford,  $75.00;  14th,  received  from  H.  F.  Ritter, 
$20.00;  14th,  borrowed  $1,000.00  from  the  bank  (j[  2);  i8th,  paid  by  check  Simmons  Hardware  Co., 
$526.48  (1[4);  1 8th,  gave  McClung  Hardware  Co.  a  check  for  $200.00;  i8th,  paid  by  check  Green 
Construction  Co.,  $31.65;  i8th,  cash  purchase  of  merchandise,  $304.05;  i8th,  cash  sales,  $421.65; 
1 8th,  paid  sundry  expenses,  $54.25.     Balance  on  hand  March  t8,  $930.14. 


PERSONAL  ACCOUNTS. 

§  28.  Personal  Accounts  represent  dealings  with  individuals,  partners,  or  corporations. 
They  are  made  necessary  by  the  purchase  and  sale  of  property  on  time.  As  the  business  man  seldom 
buys  and  sells  to  the  same  person,  they  are  divided  into  two  classes;  one  represents  the  dealings  with 
the  persons /row  whom  he  buys,  and  the  other  those  to  whom  he  sells. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  19 

ACCOUNTS  WITH  CUSTOMERS. 

§  29.  The  Object  of  these  Accounts  is  to  show  the  amount  charged  and  credited  to  each 
customer,  to  whom  the  business  sells  property  on  time.  Separate  accounts  are  kept  with  each  person, 
partnership  or  corporation. 

Debit  Customers:  Credit  Customers: 

^  I.     For  amounts  due  from  customers  at  the  f    4.   *For  all  cash  they  pay  us  on  account. 

beginning  of  the  business.  ^    5.     For  all   notes  they  give   us  signed   by 

T[  2.     For   the   value   of   all   property   sold    on  them  or  signed  by  others  and  trans- 

time,  ferred  to  us. 

^  3.     For  all  freight  prepaid  unless  we  were  to  ^    6.     For  all  time  drafts  they  accept,  or  sight 

deliver  the  property.  drafts  paid  by  them,  which  are  drawn 

by  us  to  apply  on  account. 
^    7.     For  all  rebates  allowed    by  us  for  short- 
ages,  overcharges,    damaged    goods    or 
goods   returned.      (This  is  usually  rep- 
resented by  a  credit  bill  sent  by  us.) 
^    8.     For  freight  charges  paid  by  them,  when 
we  agreed  to  deliver  the  goods  f.  o.  b. 
their  freight  station. 
^    9.     For  all  allowances  for  discount  deducted 

as  per  terms  of  the  bill. 
^  10.     For  special  deductions  made  in  settle- 
ment when  the  full  amount  can  not 
be  collected. 

^11.  The  Balance  of  a  Customer's  Account  will  show  the  amount  he  owes.  It  is  a  resource,  and 
must  be  listed  among  the  active  resources  in  the  Financial  statement.  It  usually  occupies  the  fourth 
place,  as  Cash,  Merchandise  and  Notes  Receivable  are  considered  more  available. 

^12.  To  Close  a  Customer's  Account.  The  customer's  account  is  not  closed  until  it  is  paid  in  full, 
unless  it  is  desired  to  rule  the  account  and  bring  the  balance  down,  or  transfer  it  to  a  new  page.  When 
the  account  balances  by  payment,  it  is  ruled  by  drawing  a  single  red  line  under  the  dollars  and  cents 
column  only,  and  beneath  the  amounts  on  each  side  that  balance.  When  possible,  this  line  should 
be  drawn  on  the  same  blue  line  on  each  side  of  the  account,  that  is,  the  one  just  beneath  the  lowest 
item  on  either  side.  If  there  are  two  or  more  amounts  on  either  side  of  the  account,  they  should  be 
added,  and  the  total  placed  in  small  pencil  figures  just  beneath  the  blue  line.  This  is  done  to  avoid 
any  possible  error  in  ruling  an  account  that  does  not  balance. 

If  the  account  is  made  to  balance,  the  difference,  together  with  the  date  and  the  word  "Balance," 
is  entered  on  the  credit  side  in  red  ink,  and  the  account  footed,  and  ruled  with  single  and  double  red 
lines.  (See  illustration  No.  i.)  The  balance  is  entered  on  the  debit  side,  below  the  ruling,  in  black 
ink;  if  the  space  allotted  the  account  is  full,  it  may  be  entered  on  a  new  page.  When  transferred, 
the  new  page  must  be  shown  in  the  red  ink  entry,  and  the  old  page  in  the  black  ink  entry.  This  is  for 
reference  only. 

*NOTE — A  debtor  has  the  right,  by  law,  to  indicate  on  what  item  his  payment  shall  be  applied.  Thus  if  he  owes 
several  amounts  and  wishes  the  payment  to  apply  on  any  one  particular  amount,  and  indicates  this,  the  credit  must  be 
applied  on  that  amount.  In  cases  of  this  kind  the  bookkeeper  should  indicate  the  amount  on  which  the  credit  is  allowed 
by  placing  a  letter  at  the  left  of  the  amount  of  the  item  on  the  debit  side,  and  place  the  same  letter  to  the  left  of  each 
payment  on  the  credit  side.  It  is  best  to  begin  with  "a"  and  continue  with  as  many  letters  as  may  be  required  for  pay- 
ments on  different  charges.  Each  payment  on  the  first  charge  is  indicated  by  the  letter  "a."  Each  payment  on  the  second 
charge  is  indicated  by  the  letter  "b"  on  each  side,  etc.  The  letters  are  not  necessary  when  an  item  is  paid  in  full  by  one 
payment,  and  the  account  is  ruled.  The  student  will  understand  this  better  by  referring  to  exercise  No.  4  and  illustra- 
tion No.  2. 

The  same  method  is  used  to  indicate  payments  made  to  a  creditor,  or  for  partial  payments  on  notes. 


20 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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EXERCISES  IN  CUSTOMERS'  ACCOUNTS. 


The  student  will  prepare  ledger  accounts  for  exercises  Nos.  4,  5  and  6,  on  ruled  ledger  paper.  It 
is  best  to  use  the  stock  paper,  as  it  requires  too  much  time  to  do  all  the  ruling.  The  accounts  are  not 
ruled  except  where  they  balance.  When  the  work  is  presented  to  the  teacher,  all  debits  remaining  un- 
paid, and  all  credits  on  these  charges,  are  footed  with  a  pencil,  and  the  balance  is  written  in  small  pencil 
figures  in  the  explanation  column,  opposite  the  last  amount  on  the  debit  side.  Illustration  No.  2 
is  exercise  No.  4  worked  out.  The  various  charges  and  credits  illustrate  the  different  paragraphs 
under  section  29.  References  are  given  only  in  cases  where  the  student  may  be  in  doubt.  (Read 
§  73,  Vi  1—3.  and  §  62.) 

EXERCISE  No.  4.  January  3d,  sold  J.  H.  Henderson,  on  account,  a  bill  of  merchandise  amount- 
ing to  $88.40  (^  2) ;  5th,  sold  on  account,  $32.75  (^  2) ;  9th,  sold  on  account,  $18.30  (T[  2) ;  loth,  received 
cash  on  bill  charged  on  the  3d,  $75.00  {\  4) ;  12th,  sold  on  account,  $26.10  (T[  2) ;  19th,  sold  on  account, 
$32.50  (1[2);  20th,  received  in  full  for  balance  of  bill  charged  on  the  3d,  $13.40.  (Rule  as  shown  in 
illustration  No.  2.)  26th,  sold  on  account,  $35.18;  27th,  received  cash  in  full  of  bill  charged  on  the 
5th,  $32.75;  28th,  sold  on  account,  $22.37;  31st,  received  on  account,  $10.00  (114). 

EXERCISE  No.  5.  February  ist,  balance  due  from  Walter  Rogers,  $62.75  (If  i)  I  9th,  sold  on 
account,  $116.95  (II  2);  12th,  received  cash  on  account  of  balance  due,  $25.25  {\  4);  15th,  sold  on  ac- 
count, $22.65;  i6th,  allowed  a  credit  of  $2.00  for  goods  damaged,  in  bill  charged  on  the  9th  (^f  7); 
1 8th,  received  cash,  $37.50,  in  full  for  balance  due  February  ist.  (While  this  pays  all  of  the  old  bal- 
ance, yet  the  account  can  not  be  ruled  because  there  is  a  credit  on  another  bill.)  19th,  sold  on  account, 
$94.36;  20th,  sold  on  account,  $16.95;  24th,  received  note  for  $114.95,  in  payment  of  balance  due 
on  bill  charged  on  the  9th  (^  5).  (Foot  the  two  items  on  the  debit  side,  and  the  four  items  on  the 
credit  side  and  enter  the  totals  in  small  pencil  figures.  You  will  observe  that  the  total  of  each  side 
is  the  same.  Rule  the  account  by  drawing  a  single  red  line  beneath  the  first  two  items  on  the  debit 
side,  and  the  first  four  items  on  the  credit  side.)  25th,  sold  on  account,  $39.62.  27th,  received  cash  in 
full  for  bill  charged  on  the  15th,  $22.65.  (Rule  the  account.)  27th,  received  cash  on  bill  charged  the 
19th,  $35.00,  and  allowed  freight  charges  on  the  same  bill  amounting  to  $4.65  (^  4  and  \  8) ;  27th,  sold 
on  account,  $69.27;  28th,  received  check  to  pay  bill  charged  on  the  20th,  $16.95;  28th,  received 
$30.00  to  apply  on  bill  charged  on  the  19th. 

EXERCISE  No.  6.  March  ist,  sold  Hammond  Bros.,  on  ten  days,  $261.45;  5th,  sold  on  ten 
days,  $86.45;  9th,  sold  on  thirty  days,  with  a  discount  of  3  per  cent  if  paid  in  ten  days,  $117.26.  (In- 
dicate terms  by  writing  in  the  explanation  column,  "3-10,  n-30.")  loth,  allowed  a  credit  of  $14.60 
for  goods  returned  from  those  purchased  on  the  5th  i\  7);  15th,  received  cash,  $261.45,  in  payment 
of  bill  charged  on  the  ist.     (The  account  can  not  be  ruled,  even  though  one  bill  is  paid  in  full,  on  ac- 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  21 

count  of  the  credit  for  returned  goods.  Indicate  the  payment  and  charge  by  the  letter  "a.")  17th, 
received  their  three-day  acceptance  for  balance  due  on  bill  charged  on  the  5th,  $71.85.  (Foot  the 
two  amounts  on  the  debit  side,  and  the  three  amounts  on  the  credit  side,  and  place  the  total  in  small 
pencil  figures  just  beneath  the  blue  line.  You  will  note  that  thqse  amounts  are  the  same.  Draw  a 
single  red  line  on  each  side  to  indicate  that  the  account  balances  at  this  point.)  i8th,  sold  on  thirty 
days,  |i  16.95;  iQtb,  received  check  for  $113.74  i"  payment  for  bill  charged  the  9th,  this  being  the 
amount  of  the  bill,  less  the  3  per  cent.  (T[  4  and  ^  9.  Enter  the  two  amounts.)  22d,  sold  on  ten 
days,  $58.42;  24th,  allowed  a  credit  for  freight  on  bill  charged  on  the  22d,  $5.16  (^  8);  25th,  they 
transferred  W.  H.  Smith's  note  for  $25.00  to  apply  on  account  (^  5) ;  26th,  paid  $9.65  freight  bill  for 
goods  sold  on  the  i8th.  This  was  prepaid  because  we  could  get  a  better  rate,  and  is  to  be  charged 
to  his  account  (H  3) ;  29th,  he  accepts  our  draft  at  twenty  days,  in  full  for  bill  charged  the  i8th, 
$126.60  (If  6);  29th,  sold  on  account,  $123.00;  30th,  sold  on  thirty  days,  $130.18. 

ACCOUNTS  WITH  CREDITORS. 

§  30.  The  Object  of  these  Accounts  is  to  show  the  amount  credited  for  property  purchased 
on  time  and  the  amount  charged  to  each  creditor  for  payments  made  on  each  obligation.  A  separate 
account  is  kept  with  each  person,  partnership,  or  corporation,  that  extends  credit. 

Debit  Creditors:  Credit  Creditors: 

^  I.     For  all  cash  paid  them  on  account. 

^  2.     For  all   notes  given   them   to   apply   on  ^    9.     For  amounts  due  them  at  the  beginning 

account.  of  the  business. 

^  3.     For  all  time  drafts  drawn  by  them  and  If  10.     For  the  value  of  all  property  purchased 

accepted   by   us,   or  sight  drafts   paid  from  them  on  time. 

by  us. 
^  4.     For  notes  of  others  transferred  to  them 

by  our  endorsement,  on  account. 
^  5.     For    all    rebates     allowed    by    them     on 

account    of    damaged  goods,    shortages, 

overcharges   and  returned  goods.     (This 

is     usually     represented     by    a    credit 

memorandum  sent  by  them.) 
%  6.     For  discounts  deducted  from  invoices  as 

indicated  by  the  terms. 
\  7.     For  all  freight  paid  for  them  by  us  on 

goods    delivered    f.    o.    b.    our    freight 

station.  , 

%  8.     For    special    deductions    in    settlements 

when  we  are  insolvent. 
^11.     The  Balance  of  a  Creditor's  Account  will  show  the  amount  we  owe  him.    The  credit  side 
is  always  the  larger,  and  is  a  liability,  and  appears  as  a  liability  on  the  Financial  statement. 

^  12.  To  Close  a  Creditor's  Account.  A  creditor's  account  is  not  closed  unless  it  balances  or  it  is 
desired  to  bring  down  the  balance  on  the  same  page,  or  transfer  it  to  a  new  page.  As  a  general  rule, 
payments  are  made  as  the  purchases  become  due.  In  this  case,  the  account  is  ruled  by  drawing  a 
single  red  line  on  the  blue  line  on  each  side.  When  the  account  is  ruled,  and  the  balance  brought  down, 
the  single  and  double  red  lines  are  used,  and  the  footings  entered  in  black  ink.  The  balance  is  entered 
on  the  debit  side,  in  red  ink,  before  closing,  and  brought  down  or  transferred  to  another  page,  on  the 
credit  side,  in  black  ink,  after  closing.  (See  illustration  No,  i  for  this  form  of  ruling.) 
Partial  payments  are  indicated  as  explained  in  the  note  under  §  29,  page  19. 


22 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  3.     An  Account  with  a  Creditor. 
EXERCISES  IN  CREDITOR'S  ACCOUNTS. 

The  student  will  prepare  ledger  accountsfor  exercises  Nos.  7,  8  and  9  on  ruled  ledger  paper.  The 
accounts  are  not  ruled  except  where  they  balance;  when  the  work  is  presented  to  the  teacher,  all  cred- 
its remaining  unpaid,  and  debits  or  charges  on  these,  are  footed  with  pencil,  and  the  balance  written 
in  small  pencil  figures  in  the  explanation  column  on  the  same  line  as  the  last  amount  on  the  credit 
side.  Where  payments  or  allowances  are  made  on  certain  invoices,  indicate  this  by  letter.  Illustra- 
tion No.  3  is  the  same  as  exercise  No,  7.  References  are  given  only  in  those  cases  where  the  student 
may  be  in  doubt.    These  references  are  to  the  paragraphs  under  §  30, 

EXERCISE  No.  7,  January  ist,  bought  from  Roberts  Bros,,  $416.40  (^  10);  5th,  bought  on 
fifteen  days'  time,  $825.59;  loth,  paid  invoice  of  the  ist  by  check,  $416.40.  (Rule  the  account  by 
drawing  a  single  red  line  just  beneath  the  amount  on  each  side  of  the  account.  See  illustration  No,  3.) 
nth,  bought  on  ten  days'  time,  $786.99;  12th,  paid  $400.00  on  invoice  purchased  the  5th  (^  i);  12th, 
bought  on  fifteen  days'  time,  $350,65;  i6th,  bought  on  fifteen  days'  time,  $372,65;  17th,  accepted 
their  ten-day  draft  for  $425,59,  balance  due  on  invoice  received  the  5th  (*|[  3.)  (Rule  the  account  as 
shown  in  the  illustration.)  i8th,  bought  on  thirty  days'  time,  $209,48;  20th,  paid  $300.00  on  invoice 
purchased  the  nth;  20th,  received  credit  memorandum  for  $16.50,  for  damaged  goods  on  invoice 
of  the  i6th  (If  5);  25th,  bought  on  thirty  days'  time,  $316.95;  27th,  accepted  their  ten-day  draft 
for  balance  due  on  invoice  of  the  nth,  $486.99  (^  3) ;  28th,  gave  thirty-day  note  to  pay  invoice  of  the 
I2th,  $350.65  (T[  2) ;  28th,  paid  $200.00  on  invoice  purchased  on  the  i6th;  29th,  bought  on  sixty  days' 
time,  $521,64;  31st,  accepted  ten-day  draft  in  full  for  balance  due  on  invoice  of  the  i6th  (^  3), 

EXERCISE  No,  8,  February  ist,  bought  of  Mays  &  Hickman,  on  account,  merchandise  per 
invoice  of  the  same  date,  $316,92;  3d,  bought  on  thirty  days'  time,  $217,36;  6th,  paid  cash  on  invoice 
of  the  1st,  $200,00  (K  i);  7th,  received  credit  memorandum  for  goods  returned  from  invoice  of  the 
3d,  $32.65  (^  5) ;  9th,  paid  balance  of  invoice  of  the  ist,  $116.92;  12th,  bought  on  thirty  days'  time,  with 
the  privilege  of  3  per  cent  discount  for  payment  within  ten  days,  $399.67,  (Indicate  the  terms  in  the 
explanation  column  by  writing  3-10,  n-30,)  12th,  accepted  draft  at  twenty  days,  for  balance  of  in- 
voice on  the  3d,  $184,71  (^  3).  (Foot  the  four  items  on  the  debit  side,  and  the  two  on  the  credit  side. 
The  totals  should  be  equal.  Rule  as  instructed,)  15th,  purchased  on  account,  $409,16;  i6th,  paid 
freight  on  invoice  of  the  15th  and  charged  to  their  account  as  per  agreement,  $26,37;  iQth,  paid  $150.00 
on  the  invoice  purchased  the  15th;  20th,  purchased  on  thirty  days'  time,  with  the  privilege  of  3  per 
cent  discount  for  cash  in  ten  days,  $527.62;  22d,  paid  invoice  of  the  12th,  less  discount.    The  amount 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  23 

of  the  check  is  $387.68;  discount,  $11.99  (H  i  and  ^  6).  (Enter  the  two  amounts,  and  in  the  expla- 
nation column,  on  the  same  line  as  the  amount  of  the  check,  write,  "Check;"  and  on  the  line  with 
the  discount,  "Discount.")  26th,  purchased  on  account,  $234.81;  28th,  gave  thirty-day  note  to  pay 
balance  due  on  invoice  purchased  the  15th,  $232.79  (^  2).  (The  five  items  on  the  debit  side  should 
balance  the  two  items  on  the  credit  side.  You  will  note  that  invoice  purchased  on  the  15th  was 
paid  by  freight,  $26.37,  cash,  $150.00,  and  note,  $232.79.  Invoice  of  the  12th  was  paid  by  check 
and  discount.)  28th,  paid  invoice  of  the  20th,  less  discount;  check,  $511.79;  discount,  $15.83;  28th, 
bought  on  account,  $176.29. 

EXERCISE    No.  9.    March  ist,  purchased  of  J.  B.  Jones  &  Co.,  on  ten  days'  time,  merchandise 
per  invoice  of  this  date,  $116.92;  2d,  purchased  on  sixty  days'  time,  with  the  privilege  of  3  per  cent 
for  cash  in  ten  days,  $186.25;  3^,  paid  freight  on  invoice  received  the  ist  and  charged  to  their  account, 
per  agreement,  $9.10;  5th,  bought  on  thirty  days'  time,  $209.11;  6th,  received  credit  memorandum 
for  goods  returned  from  invoice  of  the  2d,  $28.65  dl  5) !  9th,  gave  them  a  check  for  balance  due  on 
invoice  purchased  the  ist,  $107.82;  nth,  bought  on  ten  days'  time,  $436.50.  12th,  paid  invoice  of  the 
2d,  less  3  per  cent;  amount  of  check,  $152.87;  discount,  $4.73.     (^  i  and  ^  6.)     (The  student  will  note 
that  the  discount  is  calculated  on  the  amount  of  the  invoice  less  the  goods  returned,  as  it  would  not 
be  right  to  take  discount  on  the  value  of  the  latter.)     15th,  transferred  to  them  J.  B.  Jones'  note  for 
$100.00,  to  apply  on  invoice  of  the  5th;  i6th,  bought  on  thirty  days'  time,  $227.65;  i8th,  accepted  their 
three  day  draft   in   payment   of  invoice  purchased  on  the  nth;  19th,  bought  on  account,  $427.62; 
20th,  gave  them  our  note  due  in  thirty  days  for  $109.11,  balance  due  on  invoice  of  the  5th  (T[  2.) 
(When  the  two  amounts  of  each  side  are  equal,  foot  and  rule  as  instructed.    This  is  the  second  time 
the  account  should  have  been  ruled.)     21st,  bought  on  sixty  days'  time,  with  the  privilege  of  3  per 
cent  for  cash  in  ten  days,  $627.42;  22d,  paid  freight  $52.65,  on  invoice  of  the  21st,  and  charged  to  their 
account,  per  agreement;  22d,  bought  on  thirty  days'  time,  $418.26;  23d,  received  credit  memorandum 
for  $106.42,  goods  returned  from  invoice  of  the  22d;  23d,  gave  them  check  for  $127.62,  and  thirty  day 
note  for  $300.00,  to  pay  invoice  purchased  on  the  19th;  26th,  bought  on  thirty  days'  time,  $207.30; 
27th,  accepted  twenty-day  draft  for  $311.84,  for  balance  due  on  invoice  received  the  22d  (^  3) ;  27th, 
paid  invoice  of  the  21st,  less  3  per  cent  discount;  amount  of  check,  $555.95;  discount,  $18.82  (^  i 
and  Tf  6.)     (The  student  will  note  that  the  discount  is  calculated  on  the  full  amount  of  the  bill,  because 
the  charge  is  for  freight  paid  by  us  which  should  have  been  paid  by  them.)     30th,  bought  on  sixty 
days'  time,  with  the  privilege  of  3  per  cent  if  paid  in  thirty  days,  $416.25, 


24  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

MERCHANDISE  ACCOUNT. 

§  31.  Merchandise  is  a  General  Term  applied  to  goods  bought  for  sale  in  a  mercantile  or  trad- 
ing business.  The  account  kept  with  the  purchases  and  sales  of  these  goods  is  termed  "Merchandise." 
This  is  the  principal  trading  account  and  must  be  accurately  kept,  that  the  true  gain  and  gain  per 
cent  may  be  shown.  The  object  of  the  Merchandise  account  is  to  show  the  cost  of  the  goods  bought, 
and  the  amount  received  from  the  sale  of  these  goods.  There  are  two  methods  of  keeping  this  record. 
Only  one  is  illustrated  here.  The  other  will  be  explained  in  succeeding  sets.  The  following  debits 
and  credits  are  applicable  only  when  a  general  account  is  kept  with  Merchandise. 

Debit  Merchandise:  Credit  Merchandise: 

\  I.     For  the  cost  of  any  salable  goods  on  hand  ^  5.     For  all  sales  of  goods,  either  for  cash  or 

at   the   beginning   of   the    business   or  on  time. 

fiscal  period.  ^  6.     For  all  amounts  received  from  insurance 

^  2.     For  the  cost  (invoice  price)  of  goods  pur-  companies  as  payment  for  damage  to 

chased  either  for  cash  or  on  time,  merchandise. 

^  3.     For    all    amounts    paid    for    freight    and  ^  7.   *For  all  rebates  allowed  us  by  creditors 

drayage  on   merchandise  purchased.  for  goods  returned,  damaged  goods  or 

\  4.  *For    all    rebates    allowed    customers    for  shortages. 

goods    returned,     damaged    goods    or 

shortages. 

^  8.  The  Difference  between  the  two  Sides  of  the  Merchandise  Account  will  show  the  profit  or  loss 
on  merchandise,  if  all  the  goods  have  been  sold.  If  any  of  the  goods  purchased  are  unsold,  the  cost 
value  must  be  considered  in  estimating  the  profit.  This  account  is  used  in  making  the  Trading  state- 
ment. 

^  9.  To  Close  the  Merchandise  Account.  This  account  is  not  closed  until  the  end  of  the  fiscal  period, 
and  after  the  profit  has  been  ascertained  by  the  Trading  statement,  and  proved  to  be  correct  by  the 
Profit  and  Loss,  and  Financial  statements.  It  is  necessary  to  close  this  account  because  a  part  of 
the  profit  which  is  to  be  credited  to  the  investor  is  represented  by  it.  The  method  of  closing  de- 
pends upon  whether  all  the  goods  are  sold,  or  any  remain  unsold,  the  value  of  which  is  represented 
by  the  inventory. 

^10.  To  Close  the  Account  when  there  is  an  Inventory.  Enter  the  inventory  on  the  credit  side  in 
red  ink;  enter  the  amount  of  the  gain,  which  is  the  difference  of  the  account  after  the  inventory  is  en- 
tered, on  the  debit  side  in  red  ink;  add  the  red  ink  entry  on  each  side  to  the  pencil  figures  which  repre- 
sent the  total  of  each  side,  and  enter  this  new  total  in  small  pencil  figures  just  beneath  the  red  ink  entry; 
rule  the  account  with  single  and  double  red  lines;  enter  the  total  of  each  side,  which  is  the  same  as  the 
last  pencil  figures,  between  the  single  and  double  lines,  in  black  ink;  on  the  debit  side,  below  the  double 
'  red  lines,  write,  in  black  ink,  the  amount  of  the  inventory,  the  word  "Inventory,"  and  the  date  of 
the  next  day  following  the  closing.  (See  illustration  No.  4.)  The  profit  is  transferred  to  the  credit 
side  of  the  Profit  and  Loss  account,  in  black  ink.     (See  illustration  No.  6.) 

Tf  II.  To  Close  the  Account  when  there  is  no  Inventory.  Enter  in  red  ink  on  the  debit  side,  the 
amount  of  the  profit  which  is  the  differenceof  the  account;  rule  the  account  with  single  and  double 
red  lines;  enter  the  total  of  each  side  in  black  ink  between  the  single  and  double  lines;  the  profit  is 
transferred  in  black  ink  to  the  credit  side  of  the  Profit  and  Loss  account.  If  the  merchandise  has 
been  sold  at  a  loss,  the  loss  is  entered  on  the  credit  side  in  red  ink. 

♦NOTE — If  the  Merchandise  account  is  charged  or  credited  with  amounts  allowed  or  received  for  returned  goods, 
damaged  goods,  shortages,  or  rebates,  these  entries  should  be  explained  in  the  explanation  column;  and  the  total  of  such 
amounts  should  be  used  in  decreasing  or  increasing  the  losses  when  the  Trading  statement  is  made.  The  reason  for  this 
is  because  a  customer  is  credited  for  goods  returned  at  the  selling  price,  and  our  creditors  credit  us  for  the  cost  value  of 
goods  we  return,  hence  the  purchases  and  sales  are  increased  when  really  the  sales  and  purchases  have  been  decreased.  It 
is  not  the  best  practice  to  keep  only  one  account  with  merchandise,  but  many  bookkeepers  prefer  this  method,  and  we 
deem  it  best  to  illustrate  it  to  the  student  so  that  he  will  understand  it.  When  a  general  Merchandise  account  is  kept  an 
account  should  be  kept  with  Returned  Goods,  and  another  with  Rebates  and  Allowances;  the  debits  described  in  ^  4, 
and  the  credits  in  f  7,  should  be  debited  and  credited  to  these  accounts. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  4.     Merchandise  Account  for  January. 

EXERCISES  IN  THE  MERCHANDISE  ACCOUNT. 

The  following  exercises  are  given  to  familiarize  the  student  with  the  debits  and  credits  explained 
in  \*{  I — 7,  under  §  31.  References  are  given  only  when  the  student  may  be  in  doubt  as  to  the 
reason  for  the  debit  or  credit.  These  exercises  are  to  be  worked  out  on  ledger  paper,  as  shown  in  il- 
lustration No.  4,  which  is  exercise  No.  10,  and  approved  by  the  teacher.  It  is  best  to  use  ruled  ledger 
paper,  as  it  requires  too  much  time  for  the  student  to  do  the  ruling.     (§  73,  *W  i — 3.) 

EXERCISE  No.  iq.  January  2d,  bought  merchandise  from  Borches  &  Co.,  on  account,  $77.30 
(^2);  3d,  bought  merchandise  of  Kaiser  Bros.,  on  account,  $134.95  (^f  2) ;  4th,  sold  A.  R.  Jennings 
merchandise  on  account,  $14.25  (^  5) ;  5th,  bought  merchandise  from  City  Milling  Co.  for  cash,  $192.00 
(^[2) ;  6th,  cash  sales  of  merchandise,  $30.00  (^  5)  ;8th,  sold  Central  Hotel  on  account  $57.35 ;  loth,  bought 
merchandise  from  Hazen  &  Lotspeich,  $228.60  (1[  2) ;  nth,  sold  merchandise  to  A.  R.  Jennings, 
$54.25;  13th,  cash  sales  of  merchandise,  $40.00;  13th,  sold  merchandise  to  M.  A.  Johnson,  $52.40; 
15th,  bought  merchandise  from  Borches  «&  Co.,  $246.00;  i6th,  sold  merchandise  to  Imperial  Hotel, 
$49.40;  17th,  bought  merchandise  from  the  Lake  View  Creamery,  $28.00;  19th,  sold  merchandise  to 
A.  C.  Williams,  $42.30;  22d,  cash  sales  of  merchandise,  $50.00;  22d,  sold  merchandise  to  R.  G. 
Mathews,  $24.05;  23d,  bought  merchandise  from  J.  Allen  Smith,  $197.10;  25th,  sold  Imperial  Hotel 
on  account,  $80.05;  26th,  sold  C.  L.  Loyd,  on  account,  $78.25;  27th,  bought  from  Borches  &  Co., 
on  account,  $172.75;  27th,  sold  A.  R.  Jennings,  on  account,  $42.25;  27th,  cash  sales,  $42.50;  31st, 
inventory,  balance  of  goods  on  hand,  $882.46. 

EXERCISE  No.  11.  Salable  goods  on  hand  February  ist,  $316.75  (^  i) ;  ist,  bought  on  account, 
$1,186.45  (1[2);  2d,  sold  on  account,  $73.50  (If  5) ;  5th,  sold  on  account,  $327.56;  5th,  sold  on 
account,     $416.25;     5th,    sold    on     account,    $470.25;    8th,    bought    on    account,    $857.48;    8th, 


26  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

received  credit  for  $65.00,  goods  returned,  which  were  purchased  on  the  ist.  (^  7)  (Be 
sure  to  read  the  foot  note.)  9th,  sold  for  cash,  $166.50;  loth,  sold  on  account,  $119.85;  nth,  sold 
on  account,  $156.75;  12th,  bought  on  account,  $387.65;  12th,  paid  freight,  $62.85  dl  3) ;  12th, 
received  credit  for  $40.00  for  goods  returned,  purchased  on  the  8th;  14th,  received 
$360.50  from  insurance  company,  in  settlement  for  damage  to  merchandise  caused  by  fire  (^  6) ;  14th, 
sold  on  account,  $297.36;  15th,  sold  on  account,  $225.00;  15th,  sold  on  account,  $291.75;  17th,  sold 
for  cash,  $68.00;  i8th,  sold  on  account,  $212.75;  19th,  bought  on  account,  $462.92;  19th,  sold  for 
cash,  $151.00;  2ist,  sold  on  account,  $211.64;  22d,  received  $100.00  from  insurance  company  in  pay- 
ment for  merchandise  damaged  by  fire  (^  6);  23d,  sold  for  cash,  $283.00;  24th,  purchased  on  account, 
$629.40;  25th,  received  credit  for  $97.00  in  payment  for  damaged  goods  purchased  on  the  24th;  25th, 
sold  for  cash,  $220.00;  26th,  purchased  on  account,  $418.25;  28th,  paid  freight  and  drayage  bills, 
$116.80;  28th,  received  credit  for  $50.00  on  account  of  shortage  in  goods  purchased  on  the  26th;  28th, 
salable  goods  on  hand  as  per  inventory,  $1639.47. 

EXERCISE  No.  12.  Salable  goods  on  hand  as  per  inventory  of  March  ist,  $2,465.89  (^  i); 
2d,  sold  on  account,  $389.64;  2d,  bought  on  account,  $396.42;  3d,  sold  for  cash,  $275.49 
5th,  sold  on  account,  $159.48;  6th,  purchased  on  account,  $132.75;  8th,  sold  for  cash,  $437,69; 
loth,  allowed  a  customer  credit  for  $99.87,  goods  returned  from  sale  made  on  the  8th  (^  4) ;  12th,  sold 
for  cash,  $375.42;  15th,  sold  on  account,  $526.49;  15th,  paid  freight  and  drayage  bill,  $100.00  (If  3); 
17th,  purchased  on  account,  $436.82 ;  20th,  received  credit  for  $86.42  for  goods  returned  from  those 
purchased  on  the  17th;  22d,  received  $349.75  from  insurance  company,  in  payment  for  goods  damaged 
by  water  on  account  of  a  fire  next  door  (^  6) ;  23d,  purchased  for  cash,  $564.99;  25th,  sold  on  account, 
$237.84;  25th,  a  customer  returned  goods  and  was  credited  with  the  selling  price,  $65.40;  27th, 
sold  on  account,  $409.12;  31st,  paid  freight  and  drayage  bills  to  date,  $109.62;  31st,  sold  entire 
stock  of  goods  for  cash,  $2,472.48  (1[  5).  Close  as  explained  in  last  paragraph,  under  instructions 
for  closing  the  Merchandise  account.     (§31,  T[  10.) 

EXPENSE  ACCOUNT. 

§  32.     The  Object  of  this  Account  is  to  show  the  cost  of  conducting  the  business.    As  explained 

in  §  24,  this  may  be  shown  with  one  account  or  a  number  of  account?s.     The  special  debits  and  credits 

given  below,  apply  when  only  one  account  is  kept. 

Debit  Expense:  Credit  Expense: 

^  I.     For  all  cash  or  other  property  given  in  ^3.     For  any  rebates  that  will  lessen  the  ex- 

payment  for  services  rendered  in  con-  pense  of  the  business, 

ducting  the  business.  ^  4.     For  amounts  received  for  sale  of  property, 

^  2.     For  the  cost  of  all  property  which  will  be  the  value  of  which  was  charged  to  this 

consumed  by  its  use,  either  on  hand  at  account  when  purchased, 

the  beginning  of  the  business,  or  subse- 
quently purchased. 

^  5.  The  Difference  between  the  two  sides  of  this  Account  will  show  the  cost  of  conducting  the 
business,  and  is  a  loss.  This  might  be  affected  by  the  value  of  some  property  on  hand  which  had  not 
been  consumed  (^  2),  or  some  service  that  had  been  rendered  but  not  paid  for  (T[  i).  When  this  is 
the  case,  the  value  of  such  property  must  be  deducted,  and  the  amount  owed  for  services  added,  in 
order  to  determine  the  net  expenses.  It  must  appear  on  the  Profit  and  Loss  statement  among 
the  losses. 

^  6.  To  Close  the  Expense  Account.  The  Expense  account  is  closed  because  it  represents  a  part  or 
all  the  loss  shown  by  the  Profit  and  Loss  statement.  It  is  not  closed  until  the  end  of  the  fiscal  period. 
After  the  Profit  and  Loss  statement  has  been  made  and  proved  to  be  correct  by  the  Financial  state- 
ment, the  difference  is  closed  into  the  Profit  and  Loss  account.  If  there  is  a  resource  inventory 
(value  of  property  not  consumed),  this  is  entered  on  the  credit  side  in  red  ink.  If  there  is  a  liability 
inventory  (services  rendered  but  not  paid  for),  this  is  entered  on  the  debit  side  in  red  ink.     After 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


27 


these  have  been  entered,  the  difference  shows  the  net  expenses.  This  is  entered  on  the  credit  side 
in  red  ink.  The  account  is  ruled  with  single  and  double  red  lines,  and  the  total  of  each  side  en- 
tered in  black  ink,  between  the  single  and  double  lines.  The  loss  shown  in  red  ink  is  then  transferred 
to  the  debit  side  of  the  Profit  and  Loss  account,  in  black  ink.  Illustration  No.  5  shows  the  Expense 
account  closed  when  there  is  no  inventory.  As  explained,  when  there  are  inventories,  these  are  en- 
tered on  the  debit  or  credit  side  in  red  ink,  and  after  the  account  is  ruled,  they  are  brought  down 
on  the  opposite  side  in  black  ink. 


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Illustration  No.  5.     Expense  Account  for  January. 


EXERCISES  IN  EXPENSE  ACCOUNT. 

The  following  exercises  are  given  to  illustrate  the  debits  and  credits  explained  in  *||^  i — 4,  under 
§  32.  These  are  to  be  worked  out  on  ledger  paper  as  shown  in  illustration  No.  5,  and  presented 
to  the  teacher  for  approval. 

EXERCISE  No.  13.  January  4th,  paid  City  and  State  license,  $20.00  (^  i);3ist,  paid  employees' 
salaries,  $60.00  (^  i);  31st,  close  the  balance  into  the  Profit  and  Loss  account. 

EXERCISE  No.  14.  February  3d,  paid  for  stationery  and  blank  books,  $19.65  (1[  2) ;  9th, 
paid  employees,  $35.00  (Tfi);  12th,  paid  for  one  thousand  letter  heads  and  envelopes,  $6.50; 
19th,  paid  telephone  rent,  $12.00;  27th,  paid  for  stamps,  $5.00;  28th,  paid  rent,  $40.00, 
and  employees' salaries,  $35.00;  28th,  received  $5.00  for  desk  room  rented  to  W.  H.  Jones  (T[3). 
Feb.  28th,  the  account  is  closed  into  the  Profit  and  Loss  account. 

EXERCISE  No.  15.  March  ist,  books,  stationery  and  stamps  on  hand.  $50.00  (^2);  ist,  paid 
livery  bill  for  board  of  horses,  $24.00  (^  i);  5th;  paid  for  repairs  in  store,  $14.50  (^  i);  13th,  paid 
employees,  $96.50  (^  i);  22d,  paid  for  stamps,  $10.00  (^  2);  25th,  paid  premium  on  insurance  policy, 
$22.50  (^  i);  31st,  paid  bookkeeper's  salary,  $40.00,  and  other  employees,  $75.00  (^  i) ;  31st,  received 
$6.00  as  rebate  on  livery  bill,  which  was  for  services  of  our  horses,  and  was  overlooked  when  the  bill 
was  paid  (^  3) ;  31st,  sold  stamps  to  customer,  $2.00  (^  4).  March  31st,  the  account  is  closed  into  the 
Profit  and  Loss  account.  There  are  stamps,  stationery,  etc.,  on  hand  valued  at  $12.50;  rent  unpaid, 
$40.00. 

PROFIT  AND  LOSS  ACCOUNT. 

§  33.  The  Object  of  this  Account  is  to  show  all  the  profits  and  losses  for  a  fiscal  period.  It  is 
a  statistical  account,  and  not  used  except  at  the  close  of  the  fiscal  period,  and  after  the  books  are 
closed  it  remains  in  balance  until  the  next  closing.  It  is  not  good  practice  to  charge  any  special  losses, 
or  credit  any  special  profits,  to  this  account.  If  such  occur,  it  is  best  to  debit  or  credit  the  Surplus 
account. 


Debit  Profit  and  Loss: 
^  I.     At  the  close  of  each  fiscal  period  with  the  ^  3. 

difference  of  all  expense  accounts. 
f  2.     With  the  difference  of  all  other  profit  or  ^  4. 

loss     accounts    which    show    a     debit 

balance. 


Credit  Profit  and  Loss: 

At  the  close  of  each  fiscal  period  with  the 
gross  profit  on  sales. 

At  the  close  of  each  fiscal  period  with  the 
difference  of  any  profit  or  loss  ac- 
count showing  a  credit  balance. 


28 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^  5.  The  Difference  of  this  Account,  at  the  close  of  the  current  fiscal  period,  shows  the  net 
profit  or  net  loss  for  that  period,  and  is  transferred  to  the  owner's  Capital  account;  or,  in  case  of  a  cor- 
poration, to  the  Surplus  account.  In  case  of  a  partnership,  each  partner's  Capital  account  is  debited 
or  credited  for  his  proportionate  part  of  the  losses  or  profits,  according  to  the  partnership  agreement. 

^  6.  To  Close  the  Profit  and  Loss  Account.  This  account  is  closed  after  all  accounts  showing  profits 
or  losses  have  been  closed  into  it.  The  difference  at  this  time  equals  the  net  gain  or  net  loss.  If  a  gain, 
the  balance  is  written  on  the  debit  side  in  red  ink,  the  name  of  the  owner  of  the  business  being  written 
in  the  explanation  column.  If  a  loss,  the  entry  is  written  on  the  credit  side  in  red  ink.  The  account 
is  ruled  with  single  and  double  red  lines.  The  total  of  each  side  is  entered  in  black  ink,  between  the 
single  and  double  lines.  The  difference  is  transferred  in  black  ink,  to  the  credit  or  debit  side  of  the 
owner's  Capital  account.    This  entry  is  on  the  opposite  side  from  the  red  ink  entry. 

Some  accountants  do  not  use  the  Profit  and  Loss  account  in  closing  the  ledger,  but  close  all  of 
the  accounts  showing  profits  or  losses  into  the  proper  Capital  or  Surplus  account  by  a  journal 
entry.  It  is  not  good  practice  to  do  this,  as  there  should  be  an  account  in  the  ledger  which  shows  the 
same  facts  as  the  Profit  and  Loss  statement. 


'^^,^9^^^i^ 


Illustration  No.  6.      Profit  and  Loss  Account,  January  31. 
EXERCISES  IN  PROFIT  AND  LOSS  ACCOUNTS. 


The  following  exercises  are  given  to  familiarize  the  student  with  the  debits  and  credits  as  ex- 
plained in  ^^  I — 4,  under  §  33.    Work  these  out  on  ledger  paper.     Illustration  No.  6  is  exercise  No.  16. 

EXERCISE  No.  16.  January  31st,  the  Profit  and  Loss  statement  made  by  the  bgokkeeper  for 
W.  H.  Goodwin  shows  a  loss  of  $80.00  on  Expense  (*[[  i),  and  a  gain  of  $262.81  on  Merchandise  (^  3). 
The  net  profit  is  closed  into  his  Capital  account. 

EXERCISE  No.  17.  February  28th,  the  Profit  and  Loss  statement  made  by  the  bookkeeper 
for  Robert  Clark,  shows  the  following  profits  and  losses:  Losses,  Expense,  $80.00  (^  i);  Interest, 
l5.oo(T[2).  Gains,  Merchandise,  $298.75  {^  3);  Discount,  $5.65  (^[4).  The  net  gain  is  trans- 
ferred to  his  Capital  account. 

EXERCISE  No.  18.  At  the  close  of  the  business  March  31st,  the  Profit  and  Loss  statement 
made  by  the  bookkeeper  for  D.  W.  Jones,  shows  the  following  profits  and  losses:  Losses,  General 
Administrative  Expense,  $501.08  (^  i) ;  Selling  Expense,  $408.95  (^  i) ;  Discount,  $9.87  (^  2).  Gains  , 
Gross  Trading  Profit,  $1,286.29  (^3);  Interest,  $4.25  (^4);  Income  from  Real  Estate,  $65.00  (1[4). 
The  net  gain  is  closed  into  his  Capital  account. 


INVESTMENT  ACCOUNT. 

§  34.  The  Object  of  this  Account  is  to  show  the  capital  of  the  business;  that  is,  the  money  in- 
vested in  the  business  by  the  owner  at  the  beginning,  subsequent  investments,  withdrawals  from  the 
capital,  and  the  profit  or  loss  made  by  conducting  the  business.  The  account  is  named  for  the  in- 
vestor, and  should  have  the  word  "Capital"  written  after  his  name,  to  indicate  that  this  account 
shows  the  capital  of  the  business.    If  desired,  two  accounts  may  be  kept  with  the  owner,  one  showing, 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


29 


the  capital  and  the  other  his  withdrawals  for  services  rendered  the  business.     The  investment  may 
be  made  by  one  person,  two  or  more  persons  as  partners,  or  three  or  more  persons  as  a  corporation. 


1[5- 

1[6. 
1[7. 


US- 


Credit  the  Investment  Account: 

For  the  value  of  all  property  invested  at 
the  beginning  of  the  business. 

For  all  subsequent  investments. 

For  the  credit  excess  of  the  Personal  ac- 
count, if  one  is  kept,  and  the  balance 
is  closed  into  the  Capital  account. 

For  the  net  profit  as  shown  by  the  credit 
balance  of  the  Profit  and  Loss  account 
when  that  account  is  closed  at  the  end 
of  the  fiscal  period. 


Debit  the  Investment  Account: 

^  I.  For  any  debts  owed  at  the  beginning  of 
the  business  if  they  are  assumed  by  the 
business. 

^  2.  For  all  amounts  withdrawn  from  the  cap- 
ital invested.  This  does  not  include 
amounts  withdrawn  for  services  ren- 
dered the  business. 

^  3.  For  the  debit  excess  of  the  Personal 
account,  if  one  is  kept,  and  the  balance 
is  closed   into  the   Capital  account. 

^  4.  For  the  net  loss  as  shown  by  the  debit 
balance  of  the  Profit  and  Loss  account 
when  that  account  is  closed  at  the  end 
of  the  fiscal  period.  * 

^  9.  The  Balance  of  the  Investment  Account  is  the  net  amount  invested  in  the  business.  After 
the  accounts  have  been  closed  at  the  end  of  the  fiscal  period,  the  difTerence  shows  the  present  capital, 
which  is  the  investment,  plus  the  profit,  or  minus  the  loss,  for  the  period.  It  appears  on  the  Financial, 
and  Profit  and  Loss  statements. 

^10.  To  Close  the  Investment  Accouftt.  At  the  end  of  the  fiscal  period,  the  Profit  and  Loss  ac- 
count is  closed  into  the  Investment  account.  This  account  is  closed  by  writing  in  red  ink,  on  the  debit 
side,  the  difference  of  the  account,  the  date  of  closing,  and  the  words  "Present  Capital;"  it  is  then 
ruled  with  single  and  double  red  lines,  and  footed  with  black  ink.  The  Present  Capital  is 
brought  down  on  the  credit  side,  in  black  ink,  under  date  of  the  day  following  the  closing,  which  is 
the  date  of  the  beginning  of  the  new  fiscal  period. 


Illustration  No.  7.     An  Investment  or  Capital  Account. 

EXERCISES  IN  INVESTMENT  ACCOUNTS. 

The  following  exercises  are  given  to  illustrate  the  various  debits  and  credits  affecting  the  Invest- 
ment account,  as  described  in  ^^  i — 8,  §  34.  These  are  to  be  worked  out  on  ledger  paper  and  ap- 
proved by  the  teacher.     Illustration  No.  7  is  exercise  No.  19. 

EXERCISE  No.  19.  January  1st,  W.  H.  Goodwin  invested  $2,000.00  in  the  retail  grocery  busi- 
ness (^  5) ;  January  31st,  the  Financial,  and  Profit  and  Loss  statements  were  made,  and  his  net  gain 
shown  to  be  $182.81,  which  was  credited  to  his  account  when  the  Profit  and  Loss  account  was  closed 
(1[  8).    See  illustrations  Nos.  6  and  7. 


30 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


EXERCISE  No.  20.  February  ist,  Robert  Whittle  invested  $2,000.00  in  the  retail  shoe  busi- 
ness; loth,  withdrew  $500.00  (T[  2) ;  i6th,  withdrew  $1,000.00;  25th,  withdrew  $100.00;  27th,  invested 
$500.00  (^  6);  28th,  his  account  is  charged  with  $63.50,  the  balance  of  his  Personal  account  (^  3) ; 
28th,  the  Financial,  and  Profit  and  Loss  statements  are  made,  and  his  account  credited  with  the 
net  profit,  $416.25,  at  the  time  the  Profit  and  Loss  account  is  closed  (^  8). 

EXERCISE  No.  21.  March  ist,  W.  W.  Woodruff  begins  the  retail  drug  business  with  the  fol- 
lowing resources  and  liabilities:  Cash,  $4,000.00  (1[  5) ;  Real  Estate  valued  at  $2,500.00  (1[  5).  He 
owes  A.  L.  Jones  $216.50  (^  i),  and  a  note  of  $1,000.00  on  the  real  estate  (^f  i) ;  loth,  invested  $1,100.00 
2ist,  withdrew  $400.00;  31st,  the  debit  balance  of  his  Personal  account  is  $45.25,  and  this 
amount  is  transferred  to  his  Capital  account;  31st,  the  Financial,  and  Profit  and  Loss  statements 
were  made  and  show  a  net  profit  of  $622.48.  The  Profit  and  Loss  account  is  closed,  and  this  is  trans- 
ferred to  the  credit  of  his  Capital  account. 


QUESTIONS. 

1.  What  is  the  object  of  the  Cash  account?  24. 

(§  27.)  25. 

2.  Name  two  special  debits.     (T[*[  i,  2.)  26. 

3.  Name  two  special  credits.     (^^  3.4-) 

4.  What  does  the  balance  show?     (,§  27.)  27. 

5.  Why  is  the  Cash  account  closed?     (§  27.) 

6.  What    does    it    show    on    the    Financial  28. 

statement?     (§  27.) 

7.  Define   Personal  accounts.      (§  28.) 

8.  What    is    the    object    of    accounts    with  29. 

customers?     (§  29.) 

9.  Name  three  debits.     (^^  i — 3.)  30. 

10.  Name  three  credits.   (^T[  4 — 10.) 

11.  What  does  the  balance  show?     (§29.)  31. 

12.  What  does  it  represent  on  the  Financial 

statement?    (§  29.)  32. 

13.  Why  are  accounts  with  customers  closed?  33. 

(§  29-)  34- 

14.  How    are    special    payments    designated? 

(§  29,  Note.)  35. 

15.  What    is    the    object    of    accounts    with 

creditors?     (§  30.)  36. 

16.  Name  three  of  the  special  debits,     (^^f  i — 

8.)  37. 

17.  Name  the  two  special  credits,    (^f^  9,  10.)  38. 

18.  What  does  the  balance  show?     (§  30.)  39. 

19.  What   does  it  represent  on  the  Financial 

statement?     (§  30.)  40. 

20.  Why  are  accounts  with   creditors  closed? 

(§30-)  41- 

21.  How    are    special    payments    designated?  42. 

(§  29,  Note.)  43. 

22.  What  is  merchandise?  (§31.)  44. 

23.  What   is   the   object  of   the   Merchandise 

account?     (§31.)  45. 


Name  the  four  debits.     (^^  i — 4.) 

Name  the  three  credits.    (^^  5 — 7.) 

What  does  the  difference  show  if  there  is 
no  inventory?      (§  31.) 

What  does  the  difference  show  if  there  is 
an   inventory?     (§  31.) 

Why  is  it  necessary  to  take  the  value  of  the 
inventory  into  consideration  in  esti- 
mating the  profit?     (§31.) 

How  does  the  Merchandise  account  affect 
the  Trading  statement?     (§31.) 

Why  is  the  Merchandise  account  closed? 

(§31.) 
What  is  the  object  of  the  Expense  account? 

(§  32.) 
Name  two  special  debits.     (^  i,  ^2.) 
Name  two  special  credits.     (H  3,  H  4-) 
What  does  this  account  show  on  the  Profit 

and  Loss  statement?     (§  32.) 
Why    is    the    Expense    account    closed? 

(§  32.) 
What  is  the  object  of  the  Profit  and  Loss 

account?     (§  33.) 
What  does  it  show?     (§  33.) 
Why  is  it  closed?     (§  33.) 
Can  the  ledger  be  closed  without  the  Profit 

and  Loss  account?     (§  33.) 
What    is    the  object    of    the   Investment 

account?     (§  34.) 
Name  two  special  debits.     (^^  i — 4.) 
Name  two  special  credits.  (  ^^  5 — 8.) 
What  does  the  balance  show?     (§34.) 
Why   is   the   Investment   account  closed? 

(§  34-)  _ 
After   it   is   closed,  where    is  the    Present 
Capital  written?     (§34) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  31 


BLANK  BOOKS. 

§  35.  Blank  Books  are  made  up  of  writing  paper  with  such  ruling  as  may  be  desired.  The 
various  columns  represented  by  the  ruling  may  be  explained  by  printed  headings.  Blank  books  are 
prepared  so  as  to  contain  a  record  of  business  transactions.  There  are  two  classes — books  of  original 
entry,  and  books  of  complete  entry.  Illustration  No.  8  shows  one  form  of  ruling  for  a"*book  of  original 
entry;  illustration  No.  9  shows  one  form  of  ruling  in  books  of  complete  entry. 

§  36.  Books  of  Original  Entry.  These  books  are  used  to  record  the  transactions  as  they 
occur.  This  record  must  show  the  name  of  the  account  debited,  the  name  of  the  account  credited,  the 
amount  debited  and  credited,  the  explanation  or  information  for  the  auditor.  In  a  mercantile  or 
trading  business,  the  books  of  original  entry  are  (a)  the  journal,  (b)  sales  book,  (c)  purchase  book, 
and  (d)  cash  book. 

§  37.  Books  of  Complete  Entry.  While  the  record  of  the  transactions  as  given  in  the  book, 
or  books,  of  original  entry  will  show  all  the  facts,  yet  it  is  necessary  that  all  the  transactions  relative 
to  each  account  be  grouped  together.  The  book  in  which  these  facts  are  shown  is  the  Book  of  Com- 
plete Entry.  In  a  mercantile  or  trading  business,  these  are  usually  (a)  the  general  ledger,  (b)  one  or 
more  sales  ledgers,  and  (c)  one  or  more  purchase  ledgers,  depending  entirely  upon  the  number  of  trans- 
actions to  be  recorded.  The  complete  history  of  each  account  is  shown,  all  the  debits  appearing 
on  the  debit  side,  and  the  credits  on  the  credit  side.  This  information  is  obtained  from  the  book  of 
original  entry,  the  amounts  being  transferred  (posted)  from  time  to  time,  usually  once  each  day. 
Each  entry  must  show  the  date  (year,  month,  and  day  of  month),  amount  and  page  in  the  book  of 
original  entry.  The  page  is  important,  as  it  may  be  necessary  to  refer  to  the  original  transaction. 
Books  of  complete  entry  are  books  of  accounts,  because  they  contain  nothing  except  the  complete 
history  of  all  the  transactions  that  relate  to  any  particular  account,  each  having  a  separate  page 
or  part  of  a  page. 

The  various  books  of  original  and  complete  entry  will  be  explained  as  introduced.  At  the  be- 
ginning only  two  books  are  introduced,  the  journal  as  the  book  of  original  entry,  and  the  ledger  as 
the  book  of  complete  entry. 

§  38.  The  Journal  is  a  Book  of  Original  Entry,  and  is  to  contain  a  history  of  the  transactions 
as  they  occur.  It  is  the  only  book  of  original  entry  in  which  all  the  transactions  may  be  recorded. 
The  record  must  show  four  important  points,  as  follows:  First,  the  date;  that  is,  the  day  of  the  month 
and  year  on  which  the  transaction  occurred;  Second,  the  name  of  the  account  debited,  and  the  amount; 
Third,  the  name  of  the  account  credited  and  the  amount;  Fourth,  the  explanation,  which  is  the  in- 
formation for  the  auditor,  or  any  one  who  may  wish  to  know  why  the  entry  was  made.  Each  of  these 
four  points  is  very  important,  and  the  student  must  not  get  the  impression  that  one  is  more  import- 
ant than  the  other.     Note  illustration  No.  8,  and  the  explanation  given. 

The  journal  is  the  only  book  of  original  entry  in  which  the  account  showing  the  debit,  and  the 
account  showing  the  credit  can  be  recorded.  The  student  who  knows  nothing  of  the  principles  of 
double  entry  bookkeeping  must  understand  that  each  transaction  affects  at  least  two  accounts,  one 
being  debited  and  the  other  credited.  For  this  reason,  the  journal  is  the  only  book  of  original  entry 
used  at  the  beginning.  The  student  who  understands  how  to  record  transactions  in  the  journal  will 
have  no  trouble  in  making  the  record  in  any  other  book  or  books  of  original  entry. 

Journalizing  is  recording  transactions  in  the  journal.  This  refers  to  the  complete  entry,  which 
includes  the  date,  account  or  accounts  debited,  account  or  accounts  credited,  amounts  debited  and 
credited,  and  the  explanation  or  information  for  the  auditor. 


32 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Date  of  the  Opening  Entry  or  the  First  Transaction. 


Debit. 

Credit. 

• 

L.F. 

Name  of  account  debited. 

Name  of  account  credited. 

Dollars 

Cents 

Dollars 

Cents 

Here  is  written  a  complete  history  of  the  transaction. 
Do  not  sacrifice  clearness  for  brevity. 

-M 

3 
4 

Date. 

^Mdse. 

Borches  &f  Co. 

Bought  on  account,  per  invoice  dated  Jan.  i. 

77 

30 

77 

30 

Illustration  No.  8.     Form  of  Journal. 

Explanation:  The  entry  must  be  made  in  the  journal  so  that  errors  will  be  avoided  in  transferring 
(posting)  to  the  ledger.  The  date  of  the  first  transaction  is  written  on  the  blue  line  at  the  top  of  the 
page.  The  date  of  all  other  transactions  entered  on  that  page,  is  written  in  the  center  of  the  pages 
on  the  first  blue  line  below  the  explanation,  and  nothing  else  is  written  on  this  line.  The  name  of  the 
account  debited  is  written  at  the  left,  because  debits  appear  on  the  left.  The  amount  with  which  this 
account  is  debited  is  written  in  the  first,  or  debit  column.  The  name  of  the  account  credited  is  written 
about  one-half  inch  to  the  right  of  the  one  debited,  and  on  the  next  blue  line  below.  The  amount 
is  placed  in  the  second  or  credit  money  column.  The  explanation  is  written  between  the  ledger  folio 
column  at  the  left,  and  the  money  column  at  the  right.  It  begins  on  the  next  blue  line  below  the 
credit  entry,  and  may  occupy  one  or  more  lines,  depending  upon  the  number  of  words  necessary  to 
explain  the  entry.  Thus,  each  transaction  will,  of  necessity,  occupy  at  least  four  lines,  one  for  the 
date,  one  for  the  name  of  the  account  debited,  one  for  the  name  of  the  account  credited,  and  one  for 
the  explanation.    As  a  general  rule,  the  explanation  will  occupy  more  than  one  line. 

§  39.  The  Ledger  is  a  Book  of  Complete  Entry,  and  is  to  contain  a  history  of  the  trans- 
actions with  each  account;  it  is  sometimes  called  a  book  of  accounts  (§  16).  As  each  account 
has  two  sides  (§  17),  the  ruling  in  this  book  must  provide  for  these  two  sides.  As  a  general  rule,  the 
ruling  on  both  sides  is  the  same,  because  the  transactions  are  the  same,  except  that  they  affect  the  ac- 
count in  a  different  manner.  Illustration  No.  9  shows  the  simplest  form  of  the  ledger.  The  student 
will  note  that  the  debit  side  has  two  columns  for  the  date,  an  explanation  column,  a  column  for  the 
page  of  the  book  of  original  entry,  and  a  column  for  dollars  and  cents.  The  ruling  on  the  credit  side 
is  the  same.  No  entries  are  written  in  the  ledger,  except  as  they  are  transferred  from  some  book  of 
original  entry,  except  when  the  ledger  is  closed  at  the  end  of  the  fiscal  period  by  the  red  ink  method. 

NAME  OF  THE  ACCOUNT. 
Debits.  Credits. 


Year. 
Month. 


Day. 


Any  special  expla- 

Page 

Dollars. 

Cents. 

nation  deemed  nec- 

of 

essary  by  the  book- 

the 

keeper. 

book 

of 
orig- 
inal 
entry. 

must 

ration  > 

\o.  9. 

Year. 
Month. 


Day. 


Any  special  expla- 
nation deemed  nec- 
essary by  the  book- 
keeper. 


Page 

Dollars. 

of 

the 

book 

of 

orig- 

inal 

entry. 

Cents. 


Form  of  Ledger. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  33 


Explanation. — The  heavy  line  in  the  middle  divides  the  account  into  two  distinct  sides,  the 
rulings  of  which  are  exactly  alike.  The  space  at  the  extreme  left  on  each  side  is  for  the  year  and 
month,  and  the  one  next  to  it  is  for  the  day  of  the  month  on  which  the  transaction  occurred.  The 
explanation  given  in  the  third  space,  together  with  that  given  in  the  reference,  is  sufficient.  The 
fourth  space  is  also  made  clear  by  the  explanation  given.  This  enables  the  bookkeeper  to  find  the 
original  transaction  when  it  becomes  necessary.  The  last  columns,  those  at  the  right,  show  the  value 
of    the    transaction  or  the  account  in  dollars  and  cents. 

§  40.  Recording  Transactions.  The  form  of  recording  transactions  in  the  journal  and  the 
steps  necessary  to  make  a  correct  record  have  been  explained  (§38).  The  accounts  to  be  debited 
and  credited  by  the  transactions  must  be  determined  by  the  nature  of  the  transaction.  As  explained  in 
§§  8 — 15,  there  are  seven  classes  of  transactions.    The  following  rules  are  based  on  this  classification: 

§  41.  Rule  1.  An  Exchange  of  Property  for  Property.  Debit  the  account  which  is  to  rep- 
resent the  value  of  the  property  received,  and  credit  the  account  representing  the  value  of  the  property 
sold  or  given.     (First  entry  in  illustration  No.  10.) 

The  property  received  may  or  may  not  be  represented  by  an  account,  but  the  property  given 
must  be,  since  it  would  not  be  possible  to  give  (sell)  property  that  did   not  belong  to  the  business. 

§  42.  Rule  2.  An  Exchange  of  Credit  for  Property.  Debit  the  account  that  is  to  show  the 
value  of  the  property  received,  and  credit  (a)  the  person  from  whom  the  property  is  purchased,  or 
(b)  the  account  that  is  to  represent  the  liability.     (Second  entry  in  illustration  No.  10.) 

The  property  received  may  or  may  not  be  represented  by  an  account,  and  the  account  credited 
may  or  may  not  be  represented  on  the  books.  In  other  words,  property  of  a  different  kind  from  that 
owned  by  the  business,  may  be  purchased  from  some  firm  with  whom  the  business  has  had  no 
previous  dealings. 

§  43.  Rule  3.  An  Exchange  of  Property  for  Credit.  Debit  (a)  the  person  who  receives 
the  property,  or  (b)  the  account  that  is  to  represent  the  debit,  and  credit  the  account  that  shows 
the  value  of  the  property  given. 

The  account  debited  may  or  may  not  be  represented  on  the  books,  but  the  account  credited  must 
be,  because  property  could  not  be  sold  or  given,  unless  it  belonged  to  the  business.  (Third  entry  in 
illustration  No.  10.) 

§  44.  Rule  4.  Property  Given  in  Payment  of  an  Obligation.  Debit  (a)  the  person  who 
gets  the  property,  or  (b)  the  account  that  represents  the  obligation,  and  credit  the  account  that  shows 
the  value  of  the  property  given.     (Fourth  entry  in  illustration  No.  10.) 

Both  the  accounts  debited  and  credited  must  appear  on  the  books,  as  the  business  would  not 
pay  obligations  it  did  not  owe  with  property  it  did  not  have. 

§  45.  Rule  5.  Property  Received  in  Payment  of  a  Debt  Due  the  Business.  Debit  the 
account  that  is  to  represent  the  property  received,  and  credit  (a)  the  person  from  whom  it  is  received, 
or  (b)  the  account  that  represents  the  debt.     (Fifth  entry  in  illustration  No.  10.) 

The  property  received  may  or  may  not  be  represented  by  an  account,  but  the  account  credited 
must  be,  as  no  customer  would  pay  an  obligation  he  did  not  owe. 

§  46.  Rule  6.  An  Exchange  of  Property  for  Services.  Debit  the  account  that  is  to  repre- 
sent the  value  of  the  services,  and  credit  the  account  that  represents  the  value  of  the  property  given 
in  payment  for  the  services. 

The  services  purchased  may  or  may  not  be  represented  by  an  account,  but  the  property  given 
in  exchange  must  be.     (Sixth  entry  in  illustration  No.  10.) 

§  47.  Rule  7.  An  Exchange  of  Services  for  Property.  Debit  the  account  that  is  to  repre- 
sent the  value  of  the  property  received,  and  credit  the  account  that  is  to  represent  the  value  of  the 
services  rendered.     (Seventh  entry  in  illustration  No.  10.) 

The  accounts  debited  and  credited  may  or  may  not  appear  on  the  books,  as  it  might  be  possible 
for  the  business  to  receive  property  not  represented  on  the  books  in  payment  for  services  not  repre- 
sented. 


34 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


From  the  rules  i — 7,    we   deduct   the   general  rule  for  debits  and  credits  which  every  student 
should  commit  to  memory. 

§48.     General  Rule:     DEBIT  WHAT  IS  RECEIVED,  AND  WHO  OR  WHAT  COSTS 
VALUE;  CREDIT  WHAT  GOES  OUT,  AND  WHO  OR  WHAT  PRODUCES  VALUE. 


JOURNAL  ENTRIES  ILLUSTRATING  RULE;S   1—7. 


JZjzJ^ 


«^^;r_ 


Illustration  No.   10.      The  Practical  Application  of  the  Rules  1—7. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  35 


EXERCISES  IN  JOURNALIZING. 

The  student  will  work  out  the  following  exercises  on  journal  paper,  and  have  his  work  approved 
by  the  teacher.  It  is  best  to  use  the  stock  ruled  paper,  as  it  requires  too  much  time  to  do  the  ruling. 
Complete  exercise  No.  22  and  have  this  approved,  then  prepare  exercise  No.  23. 

NOTE — If  desired,  the  teacher  may  have  the  student  post  exercises  Nos.  22  and  23  to  the  ledger,  and  take  a  Trial 
Balance.     If  he  does,  the  student  must  read  §§  60 — 66  and  note  illustration  No.  17. 

EXERCISE  No.  22.  January  ist,  bought  of  Jones  Bros.,  on  account,  merchandise  per  invoice 
of  this  date,  $216.87  (§  42);  2d,  bought  of  Hazen  &  Lotspeich,  on  account,  merchandise  per  invoice 
of  the  1st,  $75.42  (§  42) ;  3d,  sold  A.  C.  Brown,  for  cash,  200  pounds  lard  at  13  cents,  20  bu.  Irish 
potatoes  at  90  cents  (§  41) ;  4th,  bought  of  Borches  &  Co.,  for  cash,  merchandise  per  invoice  of  this 
date,  $18.72  (§  41);  5th,  sold  A.  C.  Woods,  for  cash,  20  brls.  Roller  King  flour  at  $5.50  (§  41);  6th, 
sold  VV.  H.  Brown,  on  account,  10  brls.  White  Lily  flour  at  $6.25  (§  43) ;  8th,  paid  cash  to  Hazen  & 
Lotspeich  for  invoice  bought  on  the  2d  (§  44) ;  8th,  sold  Central  Hotel,  on  account,  20  brls.  Roller 
King  flour  at  $5.50  per  brl.  (§  43) ;  9th,  bought  of  Borches  &  Co.,  on  account,  merchandise  per  invoice 
of  the  8th,  $167.92  (§  42);  loth,  sold  J.  C.  Wilson,  on  account,  100  bu.  corn  at  75  cents  (§  43);  nth, 
received  cash,  $50.00,  on  account,  from  the  Central  Hotel  (§  45) ;  12th,  bought  of  B.  B.  Miller,  on  ac- 
count, merchandise  per  invoice  of  the  loth,  $84.75  (§  42);  13th,  paid  telephone  rent  for  the  month, 
$10.00  (§  46) ;  13th,  received  cash,  $62.50,  from  W.  H.  Brown,  in  payment  for  the  bill  sold  him  on  the 
6th  (§45);  15th,  bought  of  Davis  Bros.,  on  account,  merchandise  per  invoice  of  the  7th,  $203.18 
(§  42) ;  15th,  sold  J.  H.  Henry,  on  account,  25  brls.  White  Lily  flour  at  $6.25  (§  43) ;  i6th,  paid  clerk's 
salary,  $20.00  (§46);  17th,  received  $25.00  in  cash  from  J.  H.  Henry,  to  apply  on  account  (§45); 
17th,  bought  of  Jones  Bros.,  on  account,  merchandise  per  invoice  of  the  12th,  $162.50  (§  42);  17th, 
received  cash  from  C.  H.  Warren  for  100  brls.  of  flour  at  $5.25  (§  41) ;  i8th,  paid  Davis  Bros.,  $203.18 
in  full  for  bill  purchased  on  the  15th  (§  44);  i8th,  received  $25.00  from  the  First  National  Bank  in 
payment  of  the  interest  due  on  certificate  of  deposit  (§47);  i8th,  sold  C.  H.  Warren,  on  account, 
200  lbs.  lard  at  13  cents;  100  lbs.  ham  at  13  cents  (§  43);  19th,  paid  the  Central  Coal  Co.,  $12.00  for 
coal  delivered  today  (§32);  19th,  paid  Borches  &  Co.,  $100.00  on  account  (§44);  20th,  received 
$25.00  from  J.  C.  Wilson,  on  account  (§45);  20th,  paid  Jones  Bros.,  $100.00,  on  account  (§44); 
20th,  received  cash  from  O.  M.  Bailey  for  100  bu.  of  Irish  potatoes  at  90  cents  (§  41);  22d,  sold  A.  L. 
Jones,  on  account,  10  brls.  Roller  King  flour,  at  $5.50;  100  bu.  Irish  potatoes,  at  90  cents  (§  43);  22d, 
paid  M.  M.  Condon  cash  for  freight  and  drayage,  $46.25  (§31);  23d,  paid  B.  B.  Miller,  in  cash, 
$84.75  for  bill  of  the  12th  (§  44);  24th,  paid  Robt.  Smith,  $40.00,  interest  due  him  on  note  (§  46); 
25th,  paid  $16.00  for  delivering  goods  (§  32);  26th,  received  cash  from  C.  H.  Warren  in  full  for  bill 
sold  the  i8th  (§45);  27th,  received  from  Johnston  Bros.,  $62.55,  commission  due  on  sales  today. 
(Credit  Commission.  §  47) ;  29th,  received  cash  of  D.  A.  Tower,  $62.50,  payment  for  10  brls.  of 
White  Lily  flour,  at  $6.25  (§  41) ;  29th,  paid  the  First  National  Bank  $15.00,  interest  due  on  note  (§  46) ; 
30th,  paid  Borches  &  Co.,  balance  of  bill  bought  on  the  9th  (§  44) ;  31st,  paid  rent,  $25.00;  bookkeeper's 
salary,  $25.00;  clerk's  salary,  $20.00  (§46). 

EXERCISE  No,  23.  January  ist,  G.  C.  Youngblood  invests  $1,500.00  in  the  retail  shoe  busi- 
ness (§  34);  2d,  bought  from  Union  Shoe  Co.,  on  account,  invoice  of  shoes,  $681.70  (§  42);  3d,  paid 
$25.00  in  cash  for  telephone  rent  (§46);  4th,  sold  Davis  Bros.,  on  account,  10  pr.  men's  brogans, 
at  $1.25;  5th,  bought  from  Arnold,  Henegar  &  Doyle,  for  cash,  invoice  of  shoes,  $365.87;  6th,  paid 
clerk,  $10.00  (§  46) ;  8th,  cash  sales  to  date,  $65.95  (§  41) ;  9th,  bought  from  the  Hamilton  Brown  Shoe 
Co.,  on  account,  invoice  of  shoes,  $962.48  (§  42);  loth,  sold  C.  W.  Farr,  for  cash,  6  pr.  ladies'  bals. 
at  $2.25  (§  41);  nth,  sold  Arthur  Ogden,  on  account,  3  pr.  children's  shoes,  at  $1.25,  i  pr.  men's  satin 
calf,  $5.00  (§  43);  I2th,  paid  $37.50  insurance  on  stock  and  fixtures  (§  32);  13th,  received  $92.75  for 
cash  sales  to  date  (§  41);  15th,  paid  Union  Shoe  Co.,  $381.70,  on  account  (§  44);  i6th,  bought  from 
Overton  Shoe  Co.,  on  account,  invoice  of  shoes,  $468.42  (§42);  17th,  paid  $25.00  for  stamps  and 
stationery  (§46);  i8th,  cash  sales  to  date,  $181.90  (§41);  19th,  sold  Caleb  Fall,  on  account,  4  pr. 
ladies'  kids,  at  $1.75;  4  pr.  boys'  calfs,  at  $1.65  (§43);  20th,  sold  Jacob  Dolittle,  on  account,  5  pr. 


36 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


men's  shoes  at  $3.00;  4  pr.  women's  shoes  at  $2.50;  6  pr.  children's  shoes,  at  90  cents  (§  43);  20th, 
paid  $400.00  to  Hamilton  Brown  Shoe  Co.,  on  account  (§  44);  22d,  paid  clerk,  $10.00  (§  46);  23d, 
sold  Joe  Smith,  for  cash,  6  pr.  children's  shoes,  at  95  cents;  i  pr.  men's  shoes,  $4.00  (§  41);  24th, 
paid  $35.00  rent  for  the  month  (§  46);  25th,  cash  sales  to  date,  $206.10  (§  41);  26th,  bought  for  cash, 
invoice  of  shoes,  $269.87  (§  41);  27th,  received  $15.00  from  Jacob  Dolittle,  on  account  (§  45);  29th, 
sold  A.  J,  Bowen,  on  account,  5  pr.  men's  shoes,  at  $3.50;  2  pr.  ladies'  shoes  at  $2.00  (§  43);  30th, 
received  $10.00  from  Caleb  Fall,  on  account  (§  45) ;  31st,  paid  bookkeeper's  and  clerk's  salaries,  $35.00 
(§46). 


QUESTIONS. 


3- 
4- 

5- 
6. 

7- 


9- 


10. 


II. 


12. 


13- 


14. 


What  are  blank  books?     (§  35.)  15. 

Distinguish  between  books  of  original  entry 

and    books   of   complete   entry.      (§  36, 

and  §  37.) 
Define  the  journal.     (§  38.)  16. 

Name  the  four  steps  necessary  to  record 

a  transaction   in   the  journal.      (§  38.)  17. 

Define  the  ledger.      (§  39.) 
Why  is  it  divided  into  two  sides?     (§  17.) 
Why  is  the  form  of  each  side  the  same? 

(§39.)  ^  18. 

How  does  the  bookkeeper  determine    the 

accounts  debited  and  credited?  (§  40.)  19. 

When  property  is  exchanged  for  property, 

what  accounts  are  debited  and  credited? 

(§41-) 
Why  must  the  account  which  represents  20. 

the   property   given    be   on   the   books? 

(§41-)  21. 

When  property  is  purchased  on  time,  what 

accounts     are     debited     and     credited? 

(§  42.)  22. 

Is  it  necessary  for  either  or  both  of  the 

accounts  represented  by  the  transaction  23. 

to  be  on  the  books?    (§  42.)  24. 

When  property  is  sold  on  time  what  ac- 
counts are  debited  and  credited?    (§  43.) 
Is  it  necessary  for  the  account  credited  to  25. 

be  on  the  books?     Why?     (§  43.) 


When  property  is  given  in  payment  of  an 
obligation,  what  is  the  rule  for  determin- 
ing the  accounts  debited  and  credited? 

(§  44.) 
Why  must  both  accounts  be  represented 

on  the  books?     (§  44.) 

When  property  is  received  in  payment  of 
a  debt  due  the  business,  what  is  the  rule 
for  determining  the  accounts  debited 
and  credited?     (§  45.) 

Is  it  necessary  for  either  of  the  accounts  to 
be  on  the  books?     (§  45.) 

When  property  is  given  in  exchange  for 
services  rendered  the  business,  what  is 
the  rule  for  determining  the  accounts 
debited  and  credited?     (§  46.) 

Is  it  necessary  for  either  account  to  be 
represented  on  the  books?     (§  46.) 

When  property  is  received  in  exchange  for 
services  rendered  by  the  business,  what 
is  the  rule?     (§  47.) 

Is  it  necessary  for  either  of  the  accounts 
to  be  on  the  books?    (§  47.) 

Give  the  general  rule?      (§  48.) 

Why  is  it  necessary  to  give  a  full  explana- 
tion of  the  transactions  recorded  in  the 
ledger?     (§38.) 

What  is  the  use  of  the  explanation  column 
in  the  ledger?     (§  39.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


37 


JANUARY. 

The  object  of  the  transactions  given  in  this  month  is  to  teach  the  student  the  practical  appli- 
cation of  the  principles  set  forth  in  the  foregoing  matter.  He  is  to  record  transactions  in  the  journal, 
post  them  to  the  ledger,  and  at  the  end  of  the  month,  take  a  Trial  Balance,  make  the  Financial,  and 
Profit  and  Loss  statements,  and  close  the  ledger.  The  transactions  may  be  represented  by  incoming 
vouchers,  or  the  printed  record,  beginning  with  page  109. 

§  49.  Business  Papers,  aside  from  the  personal  instructions  of  his  employer,  are  the  only  evi- 
dence to  the  bookkeeper  that  a  transaction  has  been  made.  They  consist  of  bills  or  invoices,  re- 
ceipts, checks,  notes,  drafts,  orders,  statements,  shipping  invoices,  account  of  sales,  telegrams,  etc. 
The  use  of  each  will  be  explained  as  it  is  introduced.  In  January  only  two  are  used,  bills  or  invoices 
and  receipts. 

§  50.  Bills  or  Invoices.  When  goods  are  purchased  or  services  rendered,  the  written  state- 
ment, describing  the  same,  and  showing  the  value  is  called  a  bill  or  an  invoice.  These  terms  are  used 
interchangeably;  that  is,  sometimes  a  list  of  items  bought  is  called  a  bill,  and  sometimes  an  invoice. 
To  avoid  confusion,  in  the  instructions  in  this  work,  the  list  of  goods  purchased  by  the  proprietor  will 
be  termed  an  invoice,  and  that  of  goods  sold  by  him,  a  bill. 

A  bill  is  rendered  that  the  purchaser  may  know  all  of  the  goods  ordered,  have  been  received, 
and  that  the  calculations  relative  to  their  value  have  been  made  correctly.  It  should  show  the  name 
of  the  seller,  the  date,  the  name  of  the  purchaser,  and  his  address,  the  terms,  a  description  of  the  items 
exactly  as  the  goods  are  packed,  the  value  of  each  item,  and  the  total.  In  all  calculations  where  the 
result  is  a  fraction  of  one  cent,  the  fraction  is  regarded  as  a  cent  if  its  value  is  one-half  or  more;  if  less 
than  one-half,  it  is  discarded.     See  illustration  No.  11  for  the  form  of  a  bill. 


W.   H  .  GOODWIN 

DEALER  IN 

Fancy  Groceries, Provisions  and  Country  Produce. 


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J/L-^^^^.9/ 


Quantity 


Dollars 


Cts. 


Total 


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^^ 


^ 


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^^ 


->-S^^^^-y^i^<^^ 


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Illustration  No.  11.     Form  of  Bill  for  sale  made  January  4. 

§  51.  Receipt.  A  receipt  is  a  written  acknowledgment  from  the  receiver  to  the  giver  of  money 
or  other  property  received,  in  payment  for  some  form  of  indebtedness.  It  is  not  customary  to  give 
receipts  when  the  property  is  paid  for  at  the  time  of  the  purchase.  Receipts  should  be  bound  in  book 
form,   and  each  one  provided  with  a  stub,  so  that  a  permanent  record  of  each  receipt  issued  may  be 


38 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


kept.    The  stub  should  be  filled  out  first,  because  it  is  the  information  to  the  bookkeeper,  and  if  left 
blank,  may  cause  him  trouble.     Illustration  No.  12  shows  the  ordinary  form  of  a  receipt. 


No._J_ 


T)a*f.  pf7/??yf7,/f/ 

To    /^y.  r^yPji^yy^^/r^^Ay 

for   /Clr./:Y^^y??J~ 


A  moun  /  (^/^-ttw" 


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yj^yy?y 


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Illustration  No.  12.     Receipt,  January  9. 

§  52.  Duties  of  a  Bookkeeper.  In  general,  the  duty  of  the  bookkeeper  is  to  record  the 
transactions  as  they  occur,  audit  all  incoming  papers,  write  all  business  papers  that  go  out,  keep  the 
cash  in  balance,  post  to  the  ledger,  prove  the  correctness  of  the  ledger  by  a  Trial  Balance  at  the  end 
of  each  month,  and  ascertain  the  Present  Capital  and  correct  gain  by  Financial,  and  Profit  and  Loss 
statements  at  the  end  of  each  fiscal  period.  As  the  principal  duty  of  the  bookkeeper  is  to  record 
transactions,  and  see  that  all  the  incoming  and  outgoing  papers  are  made  out  correctly,  it  is  necessary 
that  he  be  accurate,  quick  at  figures,  and  neat.  He  should  have  a  proper  knowledge  of  accounting, 
so  that  he  can  use  the  best  method  of  classifying  the  accounts  and  thus  avoid  his  employer  having  to 
pay  for  the  services  of  an  expert  accountant  to  do  this. 

§  53.  Making  a  Proper  Record  of  the  Transactions.  This  includes  the  writing  of  the  trans- 
action in  the  books  of  original  entry,  and  the  proper  transfer  to  the  accounts  in  the  ledger.  The  four 
important  steps  for  recording  a  transaction  in  the  journal  are,  the  date,  the  name  of  the  account 
debited  and  the  amount,  the  name  of  the  account  credited  and  the  amount,  and  the  explanation  or  in- 
formation for  the  auditor. 

§  54.  Auditing  Incoming  Papers.  The  bookkeeper  can  not  accept  any  paper  as  correct  until 
he  has  proved  its  correctness  by  a  careful  audit.  This  can  not  be  too  strongly  impressed  upon  the 
mind  of  the  beginner,  and  in  order  to  encourage  the  proper  auditing  of  the  papers,  some  of  those 
received  by  the  student  are  intentionally  incorrect.  It  will  require  a  careful  audit  of  each  paper 
received  in  order  to  determine  the  ones  that  are  correct,  and  the  student  who  does  not  do  this  will 
have  trouble  with  his  work. 

§  55.  Writing  Outgoing  Papers.  Each  sale  requires  a  bill  and  unless  a  bill  clerk  is  employed, 
it  is  the  duty  of  the  bookkeeper  to  make  this.  He  may  also  be  required  to  write  checks,  notes,  and  other 
business  papers. 

§  56.  Keeping  the  Gash  in  Balance.  The  cash  on  hand  (in  the  safe  and  bank,  or  in  both), 
must  at  all  times  be  the  same  as  the  balance  shown  by  the  Cash  account  or  cash  book.  If  the  record 
has  been  kept  correctly,  and  no  cash  lost,  the  results  will  prove.  The  method  of  proving  will  be  ex- 
plained later. 

The  auditor  will  check  the  receipts  and  payments  of  cash  first,  and  the  bookkeeper  must  not 
only  keep  a  correct  record  of  all  cash  received  and  paid,  but  be  prepared  to  prove  to  the  auditor  that 
his  record  is  correct. 

§  57.  Terms,  "On  Account."  When  credit  is  allowed  or  received,  for  property  sold  or  pur- 
chased, and  no  fixed  time  for  payment  is  mentioned,  the  sale  or  purchase  is  said  to  be  "On  account." 
Legally,  the  amount  is  due,  and  could  be  collected  as  soon  as  the  property  is  delivered,  but  custom 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  39 

has  fixed  the  time  of  payment  as  the  first  of  the  following  month.    If  no  terms  are  stated,  the  above 
will  be  understood. 

§  58.  License.  The  advantages  and  protection  of  modern  civilization  do  not  come  free  of 
charge  to  those  who  have  property.  The  expense  of  the  government  must  be  paid,  and  to  do  this, 
taxes  are  levied.  There  are  two  methods  of  taxation ;  one  by  charging  a  certain  per  cent  of  the  value 
of  the  property,  and  the  other  by  charging  for  certain  privileges.  The  right  to  grant  these  privileges 
is  retained  by  the  government.  The  latter  is  termed  "License,"  and  is  a  charge  against  those  who 
engage  in  business.  Usually  no  license  is  charged  for  disposing  of  articles  grown  by  the  seller,  or  those 
manufactured  for  his  own  use.  Licenses  are  granted  by  an  incorporated  city,  a  county,  a  state,  or 
the  United  States  government. 

§  59.  Files.  In  every  well  regulated  business  house  will  be  found  convenient  receptacles  or 
files,  in  which  all  incoming  papers  are  kept.  These  are  so  arranged  that  any  paper  may  be  found 
with  the  least  inconvenience.  This  is  absolutely  necessary  in  order  that  immediate  reference  may 
be  made  to  facts  set  forth  in  the  desired  papers.  The  files  used  by  the  student  are  arranged  to  con- 
tain the  different  papers  received,  a  compartment  for  each.  The  papers  are  filed  in  the  order 
received. 

Each  transaction  in  business  is  represented  by  some  business  paper,  and  the  bookkeeper  must 
carefully  file  each  of  these  papers,  so  that  the  facts  stated  in  the  explanation,  in  the  book  of  original 
entry,  may  be  confirmed  by  the  original  paper.  An  auditor  will  not  take  it  for  granted  that  the  ex- 
planation given  by  the  bookkeeper  is  correct,  but  will  insist  on  comparing  this  with  the  paper.  For 
this  reason  the  explanation  must  be  expressed  so  that  the  auditor  will  know  the  paper  that  represents 
the  transaction,  and  in  which  file  it  is  to  be  found. 

§  60.  Posting  from  the  JournaL  Transferring  the  amounts  from  the  journal  to  the  ledger 
is  called  posting.  This  is  done  so  that  each  account  in  the  ledger  will  show  all  of  the  amounts  debited 
or  credited  to  it.  The  record  in  the  journal  shows  the  date  of  the  transactions,  the  name  of  the  account 
debited  and  the  amount,  and  the  name  of  the  account  credited  and  the  amount.  When  posting,  each 
amount  in  the  debit  column  is  posted  to  the  debit  side  of  the  account  written  on  the  same  line  with 
it.  Each  amount  in  the  credit  column  is  posted  to  the  credit  side  of  the  account  written  on  the  same 
line  with  it.  If  the  account  is  not  in  the  ledger,  it  is  necessary  to  write  it  in  before  posting.  Enter 
in  the  ledger  in  the  following  order:  First,  the  amount;  second,  the  page  in  the  journal;  third,  the 
date;  fourth,  any  special  information,  which  is  entered  in  the  explanation  column.  The  amounts  are 
posted  in  the  same  order  as  the  transactions  are  recorded.  To  indicate  that  the  amount  has  been 
posted  to  the  account  named,  write  the  ledger  page  (L.  F. )  of  this  account  in  the  ruled  column  at 
the  left  of  the  journal,  and  on  the  same  line  with  the  account. 

The  student  will  observe  from  the  various  illustrations  that  the  name  of  the  account  in  the  ledger 
is  written  so  that  the  beginning  and  end  will  be  an  equal  distance  from  the  left  and  right  side  of  the 
page.  Accounts  that  appear  at  the  top  of  the  page  are  written  on  the  light  blue  line  above  the  heavy 
line.  Where  more  than  one  account  is  written  on  a  page,  a  red  line  is  drawn  all  the  way  across,  and 
the  name  of  the  account  written  on  this. 

NOTE — Posting  is  transferring  the  amounts  from  any  book  of  original  entry  to  the  ledger.  The  above  instructions 
refer  to  the  journal  only  because  at  this  time  it  is  the  only  book  of  original  entry  from  which  the  student  posts.  Instruc- 
tions relative  to  posting  amounts  from  other  books  of  original  entry  will  be  given  when  introduced. 

§  61.  Instructions  for  Posting,  January  13th.  The  following  instructions  are  given  to  illus- 
trate the  above  explanation  of  posting.  The  student  should  read  the  instructions,  comparing  the 
entries  in  the  journal,  illustrations  Nos.  13  and  14,  with  the  entries  in  the  ledger,  illustrations  Nos. 
15  and  16.    It  would  be  well  to  go  over  this  very  carefully  before  posting  from  the  journal  to  the  ledger. 

FIRST  TRANSACTION.  Open  your  journal  at  the  first  page  and  notice  the  accounts  affected 
by  the  first  transaction,  also  the  amounts.    Thej^r^^  amount,  "2000,"  is  written  in  the  left  or  debit 

CContinued  on  page  44.) 


40 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  13.     Journal,  January  i — 6. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  14.     Journal,  January  6 — 13. 


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20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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44  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

column,  and  "Cash"  is  the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you  will 
turn  to  the  Cash  account  in  your  ledger,  page  2,  and  in  the  debit  or  left  money  column  write  "2000;" 
in  the  page  column,  the  one  just  to  the  left  of  the  money  column,  write  "i,"  the  page  in  the  journal 
on  which  the  transaction  is  recorded;  in  the  month  column,  the  one  at  the  extreme  left,  write  "Jan.," 
the  month  in  which  the  transaction  occurred,  (see  note  page  47) ;  in  the  day  of  the  month  column, 
the  one  just  to  the  right  of  Jan.,  write  "i,"  the  day  of  the  month.  See  first  entry  on  the  debit  side 
of  the  Cash  account,  illustration  No.  15.  To  show  that  the  item  has  been  posted,  turn  to  your  journal, 
and,  in  the  column  ruled  on  the  left  side,  write  on  the  same  line  as  Cash,  "2,"  the  page  in  the  ledger 
on  which  this  account  is  written. 

Now  turn  to  the  journal  and  notice  the  second  part  of  the  first  transaction.  The  amount, 
"2000,"  is  written  in  the  right  or  credit  column,  and  W.  H.  Goodwin  is  the  name  of  the  account 
written  on  the  same  line  with  it;  therefore  you  will  turn  to  W.  H.  Goodwin's  account  in  the  ledger 
and  in  the  credit  or  right  hand  money  column,  write  the  amount,  "2000;"  in  the  page  column,  the  one 
just  to  the  left  of  the  money  column,  write  "i,"  the  page  in  the  journal  on  which  the  transaction 
is  recorded;  in  the  month  column,  the  one  at  the  extreme  left,  write  "Jan."  (see  note  page  47) ;  and  in 
the  column  to  the  right  of  it,  write  "i,"  the  day  of  the  month.  See  entry  on  the  credit  side  of  W.  H. 
Goodwin's  account,  illustration  No.  15.  To  show  that  the  item  is  posted,  in  the  column  ruled  at  the 
left  side  of  the  journal,  write  on  the  same  line  with  W.  H.  Goodwin's  name,  "i,"  the  page  of  his  ac- 
count in  the  ledger. 

This  completes  the  posting  of  the  two  accounts  affected  by  the  first  transaction.  You  will  no- 
tice, by  referring  to  the  ledger,  that  the  Cash  account  shows  $2,000  received,  and  that  W.  H.  Good- 
win's account  is  credited  for  this  amount. 

SECOND  TRANSACTION.  By  referring  to  your  journal  you  will  observe  that  this  transac- 
tion also  afifects  two  accounts,  "Mdse."  and  "Borches  &  Co.,"  the  amounts  being  written  on  the 
same  line  as  the  accounts  affected.  You  will  notice  that  the  first  amount,  "77.30,"  is  in  the  debit 
column,  and  that  "Mdse."  is  the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you 
will  turn  to  the  "Merchandise"  account,  page  3  in  the  ledger,  and  in  the  money  column  on  the 
debit  side  write  "77.30;"  in  the  page  column,  the  one  to  the  left  of  the  amount  column,  write  "i," 
the  page  in  the  journal  on  which  the  transaction  is  recorded;  in  the  month  column,  the  one  at  the 
extreme  left,  write  "Jan.,"  the  month,  and  in  the  column  to  the  right  of  this,  "2,"  the  day  of  the 
month.  To  show  that  the  item  is  posted,  turn  to  the  journal,  and  in  the  column  ruled  at  the  left, 
and  on  the  same  line  with  Mdse.,  write  "3,"  the  page  of  the  Merchandise  account  in  the  ledger.  See 
first  entry  on  the  debit  side  of  the  Merchandise  account,  illustration  No.  15.  This  completes  the  post- 
ing of  this  item. 

The  second  amount,  "77.30,"  is  in  the  credit  column,  and  "Borches  &  Co."  is  the  name  of  the 
account  written  on  the  same  line  with  it;  therefore  you  will  turn  to  their  account,  page  5,  and  in  the 
credit  money  column  write  "77.30,"  the  amount;  in  the  page  column  write  "i,"  the  page  in  the  jour- 
nal on  which  the  transaction  is  recorded;  in  the  month  column,  the  one  at  the  extreme  left,  write 
"Jan.,"  the  month;  in  the  day  of  the  month  column  write  "2,"  the  day  of  the  month.  Turn  to  the 
journal  and  write  in  the  column  ruled  at  the  left,  and  on  the  same  line  with  Borches  &  Co.'s  name, 
"5,"  the  page  of  their  account  in  the  ledger.  See  first  entry  on  the  credit  side  of  Borches  &  Co.'s 
account,  illustration  No.  16.     This  completes  the  posting  of  the  second  transaction. 

The  ledger  now  shows  that  you  have  purchased  $77.30  worth  of  merchandise,  and  that  it  has 
not  been  paid  for,  Borches  &  Co.  being  the  ones  to  whom  the  amount  is  due. 

THIRD  TRANSACTION.  Turn  to  your  journal  and  notice  the  accounts  affected  by  the  third 
transaction,  also  the  amounts.  The  first  amount,  "134.95,"  is  in  the  debit  column,  and  "Mdse."  is 
the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you  will  turn  to  that  account, 
page  3  in  the  ledger,  and  in  the  debit  money  column  and  on  the  second  blue  line,  write  "134.95,"  the 
amount;  in  the  page  column  write  "i,"  the  page  in  the  journal;  the  month  column,  the  one  at  the  ex- 
treme left,  is  left  blank  until  the  month  changes,  in  the  column  to  the  right  of  this  write  "3,"  the  day 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  45 

of  the  month.  See  second  item  on  the  debit  side  of  the  Merchandise  account,  illustration  No.  15. 
Now  turn  to  the  journal,  and  in  the  column  ruled  at  the  left,  and  on  the  same  line  with  Mdse.,  write 
"3,"  the  page  of  that  account  in  the  ledger.    This  completes  the  posting  of  the  first  item. 

The  second  amount,  "134.95,"  is  in  the  credit  column,  and  "Kaiser  Bros."  is  the  name  of  the  ac- 
count written  on  the  same  line  with  it;  therefore  you  will  turn  to  their  account,  page  5  in  the  ledger, 
and  write  in  the  credit  money  column  and  on  the  first  blue  line  below  their  name,  "134.95;"  in  the 
page  column  write  "i,"  the  page  in  the  journal;  in  the  month  column,  the  one  at  the  extreme  left, 
write  "Jan.,"  the  month;  in  the  column  to  the  right,  write  "3,"  the  day  of  the  month.  See  first  entry 
on  the  credit  side  of  Kaiser  Bros.'  account,  illustration  No.  16.  Now  in  the  column  at  the  left  of  the 
journal,  and  on  the  same  line  with  Kaiser  Bros.'  account,  write  "5,"  the  page  of  their  account  in  the 
ledger.     This  completes  the  posting  of  the  third  transaction. 

FOURTH  TRANSACTION.  Turn  to  the  journal  and  notice  the  accounts  affected  by  the 
fourth  transaction,  dated  Jan.  4,  also  the  amounts.  The  /jr^/ amount,  "20,"  is  written  in  the  debit 
column,  and  "Expense"  is  the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you 
will  turn  to  the  Expense  account  in  the  ledger,  page  4,  and  in  the  debit  money  column  on  the  first 
blue  line  write  "20;"  in  the  page  column  write  "i,"  the  page  of  the  journal;  in  the  month  column 
write  "Jan.,"  the  month;  in  the  next  column  to  the  right  write  "4,"  the  day  of  the  month.  See  first 
entry  on  the  debit  side  of  the  Expense  account,  illustration  No.  15.  In  the  column  at  the  left  of  the 
journal,  and  on  the  same  line  with  Expense,  write  "4,"  the  page  of  that  account  in  the  ledger. 

The  second  amount,  "20,"  is  written  in  the  credit  column,  and  "Cash"  is  the  name  of  the  ac- 
count written  on  the  same  line  with  it;  therefore  you  will  turn  to  the  Cash  account,  page  2  in  the 
ledger,  and  on  the  first  blue  line  in  the  credit  money  column,  write  "20,"  the  amount;  in  the  page 
column  write  "i,"  the  page  in  the  journal;  in  the  month  column  write  "Jan.,"  the  month;  in  the 
column  to  the  right  of  this  write  "4,"  the  day  of  the  month.  See  first  entry  on  the  credit  side  of  the 
Cash  account,  illustration  No.  15.  In  the  column  on  the  left  of  the  journal,  and  on  the  same  line  with 
Cash,  write  "2,"  the  page  of  that  account  in  the  ledger.  This  completes  the  posting  of  the  fourth 
transaction. 

The  ledger  now  shows  that  $20  has  been  paid  out  for  something  necessary  for  the  carrying  on 
of  the  business. 

FIFTH  TRANSACTION.  Turn  to  your  journal  and  notice  the  accounts  affected  by  the  fifth 
transaction,  also  the  amounts.  The  first  amount,  "14.25,"  is  in  the  debit  column,  and  "A.  R.  Jen- 
nings" is  the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you  will  turn  to  his  ac- 
count, page  5,  in  the  ledger,  and  on  the  first  blue  line  below  his  name  and  in  the  debit  money  col- 
umn, write  "14.25,"  the  amount;  in  the  page  column  write  "i,"  the  page  in  the  journal;  in  the 
month  column  write  "Jan.,"  the  month;  in  the  column  just  to  the  right  of  this,  write  "4,"  the  day  of 
the  month.  See  first  entry  on  the  debit  side  of  A.  R.  Jennings'  account,  illustration  No.  16.  In  the 
column  on  the  left  side  of  the  journal,  and  on  the  same  line  with  A.  R.  Jennings,  write  "5,"  the  page 
of  his  account  in  the  ledger. 

The  second  amount,  "14.25,"  is  in  the  credit  column  of  the  journal,  and  "Mdse."  is  the  name  of 
the  account  written  on  the  same  line  with  it;  therefore  you  will  turn  to  that  account,  page  3  in  the 
ledger,  and  on  the  first  blue  line  in  the  credit  money  column  write  "14.25,"  the  amount;  in  the 
page  column  write  "i,"  the  page  in  the  journal;  in  the  month  column,  write  "Jan.,"  the  month;  in 
the  column  just  to  the  right  of  this  write  "4,"  the  day  of  the  month.  See  first  entry  on  the  credit 
side  of  Merchandise  account,  illustration  No.  15.  Indicate  the  posting  by  writing  "3,"  the  page  of 
this  account  in  the  ledger,  in  the  column  at  the  left  of  the  journal,  and  on  the  same  line  with  Mdse. 
This  completes  the  posting  of  the  fifth  transaction. 

The  ledger  now  shows  that  we  have  sold  $14.25  worth  of  merchandise,  and,  as  there  was  nothing 
received  in  payment,  A.  R.  Jennings  is  the  one  who  owes  us  for  it. 

SIXTH  TRANSACTION.  Turn  to  your  journal  and  notice  the  accounts  affected  by  the  sixth 
transaction,  also  the  amounts.     The^^r^^  amount,  "192,"  is  in  the  debit  column,  and  "Mdse."  is  the 


46  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

name  of  the  account  written  on  the  same  line  with  it;  therefore  you  will  turn  to  that  account,  page 
3  in  the  ledger,  and  on  the  third  blue  line,  and  in  the  debit  money  column,  write  "192,"  the  amount; 
in  the  page  column  write  "i,"  the  page  in  the  journal;  leave  the  month  columfi  blank;  in  the 
column,  just  to  the  right  of  this,  write  "5,"  the  day  of  the  month.  See  third  entry  on  the  debit  side 
of  the  Merchandise  account,  illustration  No.  15.  Indicate  the  item  in  the  journal  by  writing  "3"  in 
the  column  to  the  left,  and  on  the  same  line  with  Mdse. 

The  second  amount,  "192,"  is  in  the  credit  column,  and  "Cash"  is  the  name  of  the  account  writ- 
ten on  the  same  line  with  it;  therefore  you  will  turn  to  the  Cash  account,  page  2  in  the  ledger,  and 
write  the  amount,  "192,"  in  the  credit  money  column,  and  on  the  first  line  below  the  last  entry;  in 
the  page  column,  write  "i,"  the  page  in  the  journal;  the  month  column  should  remain  blank;  in 
the  column  to  the  right  of  this,  write  "5,"  the  day  of  the  month.  Indicate  the  posting  in  the  journal 
by  writing  "2,"  the  page  of  the  Cash  account  in  the  ledger,  in  the  column  ruled  at  the  left  and  on 
the  same  line  with  Cash.     This  completes  the  posting  of  the  sixth  transaction. 

See  second  entry  on  credit  side  of  the  Cash  account,  illustration  No.  15. 

The  ledger  now  shows  that  $192  has  been  exchanged  for  that  amount  of  merchandise.  (So  far 
this  will  show  no  profit,  but  should  the  goods  be  sold  for  more  than  they  cost,  then  the  Merchandise 
account  will  show  that  gain.) 

SEVENTH  TRANSACTION.  Turn  to  your  journal  and  notice  the  accounts  affected  by  the 
seventh  transaction,  also  the  amounts.  The  first  amount,  "30,"  is  written  in  the  debit  column,  and 
"Cash"  is  the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you  will  turn  to  that 
account,  page  2  in  the  ledger,  and  write  the  amount,  "30,"  in  the  debit  money  column  and  on  the 
first  blue  line  below  the  last  entry;  in  the  page  column  write  "i,"  the  page  in  the  journal;  leave  the 
month  column  blank;  in  the  column  to  the  right  of  this  write  "6,"  the  day  of  the  month.  Indicate 
the  posting  in  the  journal  by  writing  "2,"  the  page  of  the  Cash  account  in  the  ledger,  in  the  column 
at  the  left  and  on  the  same  line  with  Cash.  See  second  entry  on  the  debit  side  of  the  Cash  account, 
illustration  No.  15. 

The  second  amount,  "30,"  is  in  the  credit  column,  and  "Mdse."  is  the  name  of  the  account  written 
on  the  same  line  with  it;  therefore  you  will  turn  to  the  Merchandise  account,  page  3  in  the  ledger, 
and  in  the  credit  money  column  write  "30,"  the  amount;  in  the  page  column  write  "i,"  the  page 
in  the  journal;  leave  the  month  column  blank;  in  the  one  ruled  just  to  the  right  of  this,  write  "6," 
the  day  of  the  month.  Indicate  the  posting  by  writing  "3,"  the  page  of  the  Mdse.  account  in  the 
ledger,  in  the  column  at  the  left  of  the  journal,  and  on  the  same  line  with  Mdse.  This  completes  the 
posting  of  the  seventh  transaction. 

See  second  entry  on  credit  side  of  Mdse.  account,  illustration  No.  15. 

The  ledger  shows  that  merchandise  to  the  amount  of  $30  has  been  sold,  for  which  cash  was  re- 
ceived. 

EIGHTH  TRANSACTION.  Turn  to  your  journal  and  notice  the  accounts  affected  by  the 
eighth  transaction,  also  the  amounts.  The  first  amount,  "77.30,"  is  in  the  debit  column,  and 
"Borches  &  Co."  is  the  name  of  the  account  written  on  the  same  line  with  it;  therefore  you  will  turn 
to  their  account,  page  5  in  the  ledger,  and  write  on  the  debit  side  in  the  money  column,  "77.30," 
the  amount;  in  the  page  column,  write  "i,"  the  page  in  the  journal;  in  the  month  column  write  "Jan.," 
the  month;  and  in  the  day  of  the  month  column,  "6,"  the  day  of  the  month.  See  first  entry  on  debit 
side  of  Borches  &  Co.'s  account,  illustration  No.  16.  Indicate  the  posting  by  writing  "5,"  the  page  of 
Borches  &  Co.'s  account,  in  the  ledger,  in  the  column  in  the  journal  to  the  left  and  on  the 
same  line  with  Borches  &  Co. 

As  this  is  all  we  owe  them,  and  the  account  balances,  you  will  rule  it  with  a  single  red  line 
under  the  amount  on  each  side.  See  Borches  &  Co.'s  account,  illustration  No.  16,  also  read  "Ruling 
Personal  Accounts,"  §  62. 

The  second  amount,  "77.30,"  is  in  the  credit  column,  and  "Cash"  is  the  name  of  the  account 
written  on  the  same  line  with  it;  therefore  you  will  turn  to  the  Cash  account  in  the  ledger  and  write 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  47 

"77.30,"  the  amount,  in  the  credit  money  column;  in  the  page  column  write  "i,"  the  page  in  the 
journal;  leave  the  month  column  blank;  in  the  day  of  the  month  column  write  "6,"  the  day  of  the 
month.  See  third  entry  on  credit  side  of  the  Cash  account,  illustration  No.  15.  Indicate  the  posting 
in  the  journal  by  writing  "2,"  the  page  in  the  ledger,  in  the  column  at  the  left,  and  on  the  same  line 
with  Cash.     This  completes  the  posting  of  the  eighth  transaction. 

The  ledger  now  shows  that  we  have  $77.30  less  cash,  but  we  also  owe  Borches  &  Co.  that  amount 
less. 

The  student  should  now  be  able  to  go  forward  with  the  posting  without  any  further  aid,  but  in 
case  he  does  not  understand  it,  the  teacher  will  give  further  instructions. 

After  the  posting  is  completed,  compare  the  ledger  with  the  accounts  given  in  illustrations  Nos. 
15  and   16. 

NOTE. — The  year  must  be  written  on  both  the  debit  and  credit  side  of  each  account  in  the  ledger.  This  is  written 
in  the  month  column  and  above  the  name  of  the  month  when  the  first  item  is  posted  to  either  side.  One  time  is  suffi- 
cient for  each  year.  The  student  is  apt  to  overlook  the  importance  of  this  because  all  of  his  work  is  usually  represented 
by  one  year.     If  he  writes  the  year  as  instructed  he  is  not  so  apt  to  omit  it  when  he  accepts  a  position  in  an  office. 

§  62.  Ruling  Personal  "Accounts.  Personal  accounts  are  very  seldom  ruled,  except  when 
they  balance,  because  if  left  alone  they  will  balance.  When  a  personal  account  balances  by  being 
paid,  it  is  ruled  with  a  single  red  line  on  the  light  blue  line,  just  beneath  the  last  entry.  This  line  is 
drawn  across  the  dollars  and  cents  column,  on  each  side  of  the  account;  when  possible,  it  should  be 
ruled  on  the  same  blue  line.  Thus,  if  three  amounts  on  the  debit  side  balance  one  amount  on  the 
credit  side,  and  there  is  no  other  entry  on  the  credit  side,  the  red  line  would  be  ruled  on  the  third 
blue  line  on  each  side.  If  there  is  another  entry  on  the  credit  side,  the  line  is  drawn  on  the  third  blue 
line  on  the  debit  side,  and  on  the  first  blue  line  below  the  amount  on  the  credit  side. 

The  account  should  be  ruled  as  soon  as  the  amount  is  posted.  If  there  are  two  or  more  amounts 
on  either  side,  these  should  be  footed  and  the  total  entered  in  pencil  figures  to  show  that  the  two  sides 
are  equal.     Unless  footed,  the  bookkeeper  might  rule  an  account  that  did  not  balance. 

§  63.     Important  Points  about  Posting  from  the  Journal. 

The  following  is  a  brief  summary  of  the  instructions  given  in  §  60  and  §  61,  and  are  the 
things  to  be  learned: 

FIRST:    Keep  a  blotter  under  your  hand  at  all  times;  this  will  insure  neatness  and  cleanliness. 

SECOND :  Each  amount  written  in  the  debit  column  in  the  journal  is  posted  to  the  debit 
side  of  the  ledger,  under  the  name  of  the  account  written  on  the  same  line  with  it;  each  amount 
written  in  the  credit  column  is  posted  to  the  credit  side  of  the  ledger,  under  the  name  of  the 
account  written  on  the  same  line  with  it. 

THIRD:  The  name  of  the  account  in  the  ledger  to  which  the  amount  is  to  be  posted,  is  written 
on  the  same  line  with  the  amount  in  the  journal. 

FOURTH :  The  page  of  the  account  in  the  ledger  is  written  to  the  left  of  the  name  in  the  journal, 
when  the  amount  is  posted,  and  indicates  that  it  has  been  posted. 

FIFTH:  The  page  on  which  the  transaction  is  entered  in  the  journal,  is  placed  in  the  page 
column  to  the  left  of  the  amount  in  the  ledger,  so  that  reference  can  be  made  to  the  original  entry, 
if  desired. 

SIXTH:  The  name  of  the  account  in  the  ledger  is  written  in  the  center  of  the  page,  from  right 
to  left.  If  it  appears  at  the  top  of  a  page,  it  is  written  on  the  light  blue  line;  if  written  at  any  other 
place  on  the  page,  a  red  line  is  drawn  all  the  way  across  the  page,  on  the  blue  line  on  which  it  is 
written. 

SEVENTH:  When  an  amount  is  posted  to  an  account,  and  the  two  sides  are  made  equal  by 
this  amount,  rule  the  account  at  once.  Personal  accounts  are  ruled  by  drawing  a  single  red  line  just 
beneath  the  blue  line  on  which  the  last  entry  is  made,  and  across  the  dollars  and  cents  column  on  each 
side. 


48  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

EIGHTH:  The  year  must  be  written  at  the  top  of  the  date  column,  on  each  side  of  the  ledger 
account,  and  is  not  written  again  until  the  next  year. 

NINTH:  The  name  of  the  month  is  written  once  in  the  date  column,  and  the  column  is  then 
left  blank  until  the  month  changes. 

TENTH:  The  day  of  the  month  is  written  in  the  second  column,  at  the  left.  If  two  or  more 
transactions  occur  on  the  same  date,  the  figures  may  be  repeated,  but  are  usually  left  blank  until 
the  date  changes. 

ELEVENTH:    Where  the  amount  is  expressed  in  dollars,  it  is  not  necessary  to  write  ciphers. 

TWELFTH:  The  entry  is  made  in  the  ledger  in  the  following  order — amount,  page  of  the  jour- 
nal, date,  and  special  information. 

THIRTEENTH:  Special  information  refers  to  terms  of  bills,  the  time  of  notes,  the  particular 
kind  of  property  represented  by  the  account,  and  such  other  information  as  will  enable  the  owner  to 
know  the  reason  for  the  debit  or  credit. 

§  64.  Proving  Cash.  The  balance  of  the  Cash  account  must  be  the  same  as  the  cash  on  hand. 
The  cash  on  hand  may  be  in  the  safe,  in  the  bank,  or  a  part  in  each  place.  When  the  Cash  account  is 
kept  in  the  ledger,  it  can  not  be  proved  until  all  the  transactions  relative  to  cash  have  been  posted. 
When  the  posting  is  completed,  the  debit  side  shows  all  cash  received  and  the  credit  side  all  cash 
paid.  If  the  posting  is  correct,  and  no  money  has  been  lost,  the  difference  of  the  Cash  account  will 
equal  the  money  on  hand. 

After  the  student  has  completed  posting,  January  13th,  he  is  instructed  to  prove  cash;  that  is, 
ascertain  if  the  difference  of  the  Cash  account  equals  the  money  he  has  in  his  "Money  and  Checks" 
envelope.  To  do  this  he  must  first  foot  the  two  sides  of  the  Cash  account,  and  enter  the  totals  in  small 
pencil  figures  just  beneath  the  last  entry.  On  a  piece  of  scratch  paper  he  will  subtract  the  total  of  the 
credit  side  from  the  total  of  the  debit  side.  The  difference  will  be  the  same  as  the  cash  on  hand,  if 
he  has  made  no  mistake.  If  he  has,  it  will  be  necessary  to  audit  the  various  receipts  and  payments 
of  cash,  see  that  the  correct  amount  of  money  was  placed  in  the  cash  file,  at  the  time  it  was  received, 
and  the  correct  amount  paid  out  at  the  time  he  was  instructed  to  make  the  payment.  The  second 
account  in  illustration  No.  15  shows  the  Cash  account  as  it  should  appear  in  his  ledger. 

§  65.  Checking  the  Posting.  Errors  are  apt  to  be  made  in  posting  either  in  the  amount, 
the  side  of  the  account,  or  the  account  to  which  the  amount  should  be  posted.  That  these  may  be 
detected,  the  methodical  bookkeeper  will  go  over  his  posting,  comparing  the  amounts  in  the  ledger 
with  those  in  the  journal  or  other  book  of  original  entry.  No  definite  results  could  be  obtained  by 
looking  over  the  work,  as  errors  in  double  posting  might  be  entirely  overlooked,  and  others  are  apt  to 
be.  To  avoid  this,  a  small  check  mark  (V)  is  placed  on  the  double  line  ruled  at  the  left  of  the  amount 
in  the  journal  or  other  books  of  original  entry,  and  the  ledger.  The  check  marks  should  be  placed  on 
the  same  vertical  line,  and  made  large  enough  that  they  may  not  be  overlooked. 

The  transactions  in  the  book  or  books  of  original  entry  are  checked  in  the  same  order  as  the  post- 
ing is  done.  When  the  checking  is  completed,  any  errors  can  be  detected  at  a  glance,  because  there 
would  be  no  check  mark  opposite  the  amounts.  As  the  check  marks  are  all  on  the  same  vertical  line, 
amounts  that  are  not  checked  can  be  easily  detected. 

When  the  student  has  posted  the  transactions  for  the  first  thirteen  days  in  January,  he 
should  check  the  posting  as  instructed  above.  Checking  the  posting  is  exactly  the  same  as  posting, 
except  that  the  amounts  are  already  written,  and  the  object  of  the  checking  is  to  see  that  the  work 
is  correct.  The  check  marks  are  written  with  a  lead  pencil,  but  are  not  erased.  The  practical  book- 
keeper will  arrange  to  check  the  posting  at  some  other  time  than  that  immediately  following  the  post- 
ing, because  errors  are  more  likely  to  be  overlooked  at  that  time  than  later,  when  all  the  facts  relative 
to  the  posting  are  not  so  fresh  in  his  memory.     This  will  be  further  explained  later  in  the  work. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


49 


QUESTIONS. 


10 

II 

12 

14. 


What  are  business  papers?     (§  49.) 
Distinguish  between  a  bill  and  an  invoice. 

(§  50.) 
When  the  result  of  calculating  an  item  is 

less    than    one-half    a    cent,    how    is    it 

treated?     When  it  is  one-half  a  cent  or 

more?     (§  50.) 
What  is  a  receipt?     (§  51.) 
Why  is  it  best  to  fill  out  the  stub  first? 

(§51.) 

Name  some  of  the  duties  of  the  book- 
keeper.     (§  52.) 

What  is  meant  by  making  a  proper  record 
of  the  transactions?     (§  53.) 

What  is  meant  by  auditing  incoming 
papers?     (§  54.) 

Name  some  of  the  papers  that  the  book- 
keeper may  be  required  to  write.    (§  55.) 

Why  is  it  necessary  to  keep  the  cash  in 
balance?     (§  56.) 

What  is  meant  by  the  term,  "On  Account." 

(§  57-) 
Define  license.     (§  58.) 
Why  are  files  necessary  in  a  business  office? 

(§  59J 
Describe  posting  from  the  journal.     (§  60.) 


15.  How  do  you  indicate  in  the  journal  that 

the  transaction  has  been  posted?    (§  60.) 

16.  Why  is  the  journal  page  written  in  the 

folio  column  in  the  ledger?     (§  60.) 

17.  When    posting,    what    is    entered    in    the 

ledger  first?    Second?    Third?    Fourth? 
(§  60.) 

18.  Can  more  than  one  account  be  written  on 

a  page  in  the  ledger?    (§  60.) 

19.  In  your  own  language  describe  posting  the 

transaction  for  January   1st.     (§  61.) 

20.  When  are  Personal  accounts  ruled?    (§  62.) 

21.  Why  are  they  ruled?     (§62.) 

22.  How  are  they  ruled?     (§  62.) 

23.  Name  four  of  the  important  points  about 

posting.     (§  63.) 

24.  Describe  in  your  own  language  the  method 

of  proving  cash,  January  13th.     (§  64.) 

25.  Why  does  the  bookkeeper  check  his  post- 

ings?    (§  65.) 

26.  Why  are  the  check  marks  entered  on  the 

same  vertical  line  in  the  journal?    (§  65.) 

27.  Why  are  they  entered  on  the  same  line  in 

the  ledger?     (§  65.) 

28.  Why  is  it  necessary  to  use  check  marks? 

(§  65.) 


TRIAL  BALANCE. 


Careful  posting  and  checking  are  indications  to  the  bookkeeper  that  his  ledger  is  correct;  but 
as  the  experienced  bookkeeper  knows,  and  as  the  student  will  learn,  it  is  not  absolute  evidence.  There 
is  a  possibility  of  making  an  error  in  posting  and  not  detecting  it  by  checking,  or  of  making  a  mistake 
in  the  addition  of  those  accounts  that  have  more  than  one  amount  on  the  debit  or  credit  side.  For 
these,  and  other  reasons  which  are  explained  later,  there  must  be  some  additional  proof  of  the  correct- 
ness of  the  ledger. 

A  careful  analysis  of  the  work  in  the  journal  or  other  book  of  original  entry,  will  show  that  this 
can  be  very  easily  accomplished.  Each  transaction  recorded  in  the  journal  affects  two  accounts, 
the  one  debited,  and  the  other  credited;  one  is  debited  for  exactly  the  same  amount  as  the  other 
is  credited,  because  each  transaction  is  an  exchange  of  equal  values.  If  the  debit  and  credit  columns 
of  the  journal  are  added,  the  total  should  be  the  same. 

In  posting,  each  amount  in  the  debit  column  of  the  journal  is  posted  to  the  debit  side  of  the 
ledger;  each  amount  in  the  credit  column  of  the  journal  is  posted  to  the  credit  side  of  the  ledger.  If 
the  total  of  the  two  columns  in  the  journal  are  equal,  the  total  of  the  two  sides  of  the  ledger  must  be 
equal.    A  Trial  Balance  is  taken  to  prove  this.  • 


50  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

§  66.  The  Trial  Balance  is  a  list  of  all  the  accounts  in  the  ledger,  and  the  amount  or  amounts  writ- 
ten on  the  debit  and  credit  side  of  each.  If  an  account  balances,  which  is  indicated  by  its  being  ruled, 
it  would  not  be  necessary  to  write  it  in  the  Trial  Balance,  because  the  two  sides  being  equal  would 
only  increase  the  total  of  the  debits  and  credits  the  same  amount.  If  an  account  has  two  or  more 
amounts  posted  to  the  debit  or  credit  side,  these  are  added,  and  the  total  only  used  in  the  Trial  Bal- 
ance. If  there  is  one  or  more  amounts  on  the  debit  side,  and  one  or  more  amounts  on  the  credit  side 
of  an  account,  the  total  of  each  side  may  be  used,  or  the  difference.  Thus,  if  an  account  is  debited 
with  $100.00,  and  credited  with  $50.00,  the  Trial  Balance  would  balance  if  it  was  entered  as  a  debit 
of  $50.00.  If  the  posting  is  correct,  and  the  addition  of  those  accounts  that  have  more  than  one 
amount  on  the  debit  or  credit  side  is  correct,  and  the  totals  are  transferred  from  the  ledger  to  the 
Trial  Balance  correctly,  then  the  two  sides  must  balance.  This  proves  the  facts  just 
mentioned.  It  would  not  prove  that  an  amount  had  been  posted  to  the  correct  side  or  to  the  wrong 
account,  because  it  only  proves  that  the  total  debits  and  credits  are  equal.  Thus,  if  J.  C.  Jones  buys 
a  bill  of  goods,  and  is  charged  with  the  amount  in  the  journal,  but  in  posting  this  is  transferred  to  the 
debit  side  of  the  account  of  J.  R.  James,  the  Trial  Balance  would  balance,  but  these  two  accounts 
would  be  wrong.     Errors  of  this  kind  are  usually  detected  in  the  checking. 

From  the  above,  the  student  will  observe  that  the  Trial  Balance  is  a  list  of  all  the  accounts  in  the 
ledger,  with  the  total  amount  of  the  debit  and  credit  sides,  or  the  differences.  He  will  also  observe  that, 
if  it  does  not  balance,  it  will  be  necessary  to  check  his  work  in  order  to  discover  the  error,  as  the 
error  is  in  his  work  and  not  anywhere  else. 

The  usual  method  of  taking  a  Trial  Balance  is  as  follows: 

1[  I.  See  that  each  Amount  in  the  journal  or  other  books  of  original  entry,  and  in  the  ledger, 
is  checked  with  a  check  mark. 

*l  2.  Foot  each  Account  in  the  Ledger  that  has  more  than  one  amount  on  the  debit  or  credit  side, 
and  write  the  total  in  small  pencil  figures  just  beneath  the  blue  line  on  which  the  last  entry  is  made. 

^  3.  Take  the  Difference  of  the  Accounts  with  Persons  and  write  it  with  small  pencil  figures  in  the 
explanation  column  on  the  larger  side  and  just  to  the  left  of  the  last  entry.  The  calculations  for  as- 
certaining this  should  be  made  on  scratch  paper. 

^4.  Check  the  Additions  and  Subtractions  just  completed.  Do  not  accept  your  work  as  correct 
until  you  have  checked  it. 

^  5.  On  a  Sheet  of  Journal  Paper  write  the  names  of  the  accounts  in  the  same  order  as  they  are 
arranged  in  the  ledger.  As  each  account  is  written,  place  the  total  debits  in  the  first  column,  and 
the  credits  in  the  second  column.  The  only  exceptions  to  this,  are  Cash  and  accounts  with  persons, 
the  balance  of  these  being  used.    Cash  is  proved  before  the  Trial  Balance  is  made. 

^6.  Add  the  Debit  Column,  and  place  the  total  in  small  pencil  figures  beneath  the  last  amount; 
add  the  credit  column  and  place  the  total  beneath  the  last  amount.  The  two  amounts  should  be 
equal. 

^  7.  If  the  Amounts  are  not  equal,  check  the  work  in  the  same  order  as  it  was  done,  and  the  error 
is  sure  to  be  found. 

Trial  Balance  January  31st. 

§  67.  The  Foregoing  Instructions  relative  to  the  Trial  Balance  should  be  all  that  the  student 
will  need,  but  in  order  that  he  may  get  a  clearer  understanding  of  the  method  of  taking  a  Trial  Balance, 
the  following  instructions  are  given  in  detail.  If  he  will  follow  these  in  taking  the  first  Trial  Balance, 
and  continue  to  follow  them  with  all  future  ones,  he  will  never  have  to  call  on  the  teacher  for 
assistance  in  detecting  his  errors.  If  he  is  satisfied  to  follow  the  first  two  or  three,  and 
then  depend  on  his  own  knowledge  for  the  remainder  of  the  work,  he  is  sure  to  call  on  the  teacher 
for  assistance. 

^  I.  Prove  Cash  as  instructed  in  §  64.  Never  undertake  to  take  a  Trial  Balance  until  the  cash 
has  been  proved. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  51 

^  2.  Sharpen  your  Pencil  to  a  fine  point  and  keep  it  sharp.  It  is  difficult  to  make  neat  figures 
with  a  soft  pencil;  hence,  the  harder  the  lead,  the  neater  the  work. 

^3.  Add  each  Account  in  the  Ledger  having  more  than  one  amount  on  the  debit  or  credit  side ; 
place  the  total  in  small  pencil  figures  just  beneath  the  blue  line  on  which  the  last  entry  is  made.  The 
figures  must  be  small,  otherwise  they  will  interfere  with  the  amount  to  be  entered  on  the  next  blue  line. 

^  4.  Take  the  Difference  between  the  two  Sides  of  each  of  the  Personal  accounts  and  write  it  in 
the  explanation  column  on  the  larger  side;  make  the  figures  very  small,  and  with  a  pencil;  write 
them  on  the  line  with  the  last  entry. 

Tf  5.  Take  a  Sheet  of  Journal  Paper,  that  which  has  the  same  ruling  as  your  journal,  and  on  the 
blue  line  at  the  top  write  "Trial  Balance,  January  31,  191.  .." 

^  6.  On  the  first  blue  line  below  the  heavy  line,  write  the  name  of  the  first  account  in  the  ledger, 
which,  in  this  case,  is  that  of  W.  H.  Goodwin,  and  in  the  credit  column  write  the  amount  ($2,000) 
with  which  the  account  is  credited.  Write  "i,"  the  page  of  the  account  in  the  ledger,  just  to  the  left 
of  W.  H.  Goodwin's  name. 

^7.  On  the  next  blue  line  write  Cash.  In  the  first  money  column  write  the  difference,  $1,547.50. 
You  know  this  is  correct  because  you  have  proved  the  cash.  At  the  left  of  the  word  Cash  write  "2,"  the 
page  in  the  ledger. 

^  8.  On  the  third  blue  line  write  Merchandise,  which  is  the  name  of  the  next  account  in  the  ledger; 
in  the  first  or  debit  column,  write  the  total  of  the  debit  side,  $1,276.70,  and  in  the  second  or  credit 
column,  write  the  total  of  the  credit  side,  $657.05.  Write  "3,"  the  page  of  the  account  in  the  ledger, 
just  to  the  left  of  the  name  of  the  account  on  the  Trial  Balance. 

^9.  On  the  fourth  blue  line  write  Expense,  the  next  account  in  the  ledger;  in  the  first  or  debit 
column,  write  the  total  of  the  debit  side,  $80.00.  At  the  left  of  the  account  on  the  Trial  Balance  write 
"4,"  the  page  of  the  account  in  the  ledger. 

^  10.  On  the  fifth  blue  line  write  Borches  &f  Co.,  the  name  of  the  next  account;  in  the  second 
money  column  write  $96.00,  the  amount  with  which  the  account  is  credited.  Place  "5,"  the  page  of 
the  account  in  the  ledger,  to  the  left  of  the  name  on  the  Trial  Balance. 

^11.  Omit  Kaiser  Bros.'  account,  as  the  two  sides  are  equal,  as  indicated  by  the  ruling.  When 
the  two  sides  of  an  account  are  equal,  it  is  ruled  and  does  not  appear  in  the  Trial  Balance. 

^  12.  On  the  sixth  blue  line  write  A.  R.  Jennings,  the  next  account;  in  the  first  or  debit  column 
write  $54.25,  the  amount  on  the  debit  side  of  his  account.  The  ruling  indicates  that  the  debit  and 
credit  sides  of  the  account  above  the  lines  are  equal.  Place  "5,"  the  page  of  the  account  in  the  ledger, 
in  the  column  to  the  left  of  the  name  of  the  account. 

^  13.  On  the  seventh  blue  line  write  Central  Hotel,  the  next  account;  in  the  debit  column  write 
$12.35,  which  is  the  balance  of  the  account.  Write  "6,"  the  page  of  the  account  in  the  ledger,  to 
the  left  of  the  name  of  the  account. 

^  14.  On  the  eighth  blue  line  write  Hazen  &  Lotspeich;  the  ninth,  M.  A.  Johnson;  the  tenth, 
Imperial  Hotel;  the  eleventh.  Lake  View  Creamery;  the  twelfth,  A.  C.  Williams;  thirteenth,  R.  G. 
Mathews;  fourteenth,  J.  Allen  Smith  &  Co.;  fifteenth,  C.  L.  Loyd;  sixteenth,  J.  C.  Wilson;  seven- 
teenth, Donaldson  Bros.  Write  the  balance  of  each  account  in  the  debit  or  credit  column,  as  indicated 
by  the  account  in  the  ledger.  Write  the  page  of  each  account  in  the  ledger  in  the  column  to  the  left 
of  the  name. 

^  15.  Add  each  Side  of  the  Trial  Balance,  and  write  the  total  in  small  pencil  figures ;  the  total  of 
the  two  columns  should  be  equal.  If  they  are  not,  begin  with  ^  2,  given  above,  and  check  the  work 
for  errors. 

T[  16.  Rule  the  Trial  Balance  with  single  and  double  red  lines,  and  write  the  footings  in  black 
ink.    See  illustration  No.  17. 

You  can  not  understand  the  foregoing  with  one  reading;  each  paragraph  must  be  stud- 
ied and  understood. 


52 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Illustration  No.  17. 
§  68.     Important  Points  about  the  Trial  Balance. 

FIRST:  The  result  is  the  same,  whether  the  total  footings  of  both  sides  or  the  difference  of 
each  account  in  the  ledger  is  used. 

SECOND:  It  is  customary  to  use  the  balance  of  Personal  accounts  and  Cash,  and  the  total 
of  both  sides  of  all  other  accounts. 

THIRD:  The  first  or  debit  column  of  the  Trial  Balance  represents  the  debit  side  of  the  ledger; 
and  the  second,  or  credit,  column  of  the  Trial  Balance  represents  the  credit  side  of  the  ledger. 

FOURTH:  Accounts  that  balance  are  not  entered  on  the  Trial  Balance  because  the  total  of 
each  side  is  the  same,  and  if  entered,  they  would  only  add  to  the  total  of  the  Trial  Balance. 

FIFTH:  The  Trial  Balance  is  not  made  until  after  all  of  the  amounts  in  the  journal  have 
been  posted  and  checked. 

SIXTH:  The  debit  and  credit  columns  of  the  Trial  Balance  are  equal  because  the  amounts 
debited  and  credited  in  each  transaction  are  equal. 

SEVENTH:  The  Trial  Balance  proves  that  each  debit  amount  has  been  posted  to  the  debit 
side  of  the  ledger,  and  each  credit  amount  posted  to  the  credit  side  of  the  ledger;  but  it  does  not  show 
errors  in  posting  to  the  wrong  account.    These  can  be  detected  only  by  checking. 

EIGHTH:  When  the  Trial  Balance  does  not  balance,  the  error  may  be  (a)  in  posting;  (b)  adding 
the  accounts  in  the  ledger;  (c)  taking  the  difference  of  Personal  accounts;  (d)  transferring  the  amounts 
from  the  ledger  to  the  Trial  Balance;  (e)  footing  the  Trial  Balance. 

NINTH:  The  Trial  Balance  shows  the  condition  of  each  account  in  the  ledger,  and  is  really  a 
condensed  form  of  the  ledger. 

TENTH:    The  practical  bookkeeper  takes  a  Trial  Balance  at  least  once  each  month. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  53 

USE  OF  RED  INK  IN  BOOKKEEPING. 

§  69.  The  Use  of  Red  Ink  in  Bookkeeping  is  entirely  optional  with  the  bookkeeper,  or  the  one 
who  has  charge  of  the  office  work.  It  is  the  best  practice  to  use  it,  as  it  not  only  adds  to  the  appear- 
ance of  the  books,  but  also  has  a  meaning  to  the  auditor.  The  following  rules  govern  the  use  of  red 
ink  in  bookkeeping,  and  the  student  is  advised  to  use  it  accordingly. 

§  70.  Rule  1.  Use  Red  Ink  for  all  Ruling.  This  applies  to  the  ruling  in  the  books  of  orig- 
inal entry,  the  ledger,  the  Trial  Balance,  the  Financial,  and  Profit  and  Loss  statements. 

§  71.  Rule  2.  When  an  Account  is  to  be  Balanced,  ruled  and  the  balance  brought  down, 
or  carried  to  a  new  page,  use  red  ink  for  the  amount  of  the  balance,  the  date,  the  page  to  which  the 
balance  is  transferred,  and  the  word  ^^Balance"  in  the  explanation  column.  Black  ink  is  used  to  enter 
them  in  the  new  location. 

§  72.  Rule  3.  When  an  Amount  is  Written  in  the  Ledger,  without  being  posted  from 
some  book  of  original  entry,  use  red  ink  for  all  the  facts  concerning  the  entry;  these  are  the  amount, 
the  explanation,  and  the  date.  This  applies  to  the  first  time  the  entry  is  made.  The  same  amount  must 
appear  on  the  opposite  side  in  some  other  account,  in  order  to  keep  the  ledger  in  balance;  black  ink 
is  used  in  the  second  entry.  This  rule  applies  especially  to  the  closing  of  the  ledger  by  the  red  ink 
method,  as  explained  later. 

RULING. 

§  73.  Ruled  Lines  in  Bookkeeping  indicate  that  all  amounts  above  the  line  balance  the  other 
amounts  on  the  opposite  side.  There  are  two  forms  used:  One  a  single  red  line  under  the  dollars 
and  cents  column  on  each  side;  the  other  a  single  red  line  under  the  dollars  and  cents  column  on  each 
side,  and  double  red  lines  on  the  next  blue  line  below  and  across  all  columns  except  those  for  the 
explanation. 

^  I.  Position  of  the  Rule.  The  student  will  note  the  following  relative  to  the  correct  position 
of  the  rule: 

Lay  the  rule  on  the  paper,  with  the  brass  edge  up  and  toward  the  front,  just  below  the  blue  line 
on  which  the  single  red  line  is  to  be  drawn.  Hold  the  rule  in  position  with  the  left  hand.  Rule  the 
single  line  with  the  right  hand,  always  moving  from  left  to  right,  letting  the  pen  glide  along  the  brass 
edge  of  the  rule.  When  the  single  line  is  ruled,  move  the  rule  down  one  line  and  rule  the  double  line. 
By  changing  the  angle  of  the  pen,  both  double  lines  can  be  drawn  without  moving  the  rule.  If  you 
lay  the  brass  edge  next  to  the  paper,  the  ink  will  flow  under  it  and  blot  your  book.  It  is  very  difficult 
to  draw  neat  lines  with  a  rule  that  has  no  brass  edge.  With  a  little  practice,  the  student  can  soon 
learn  to  make  perfect  lines  with  the  rule  in  position  as  described. 

^  2.  Single  Red  Lines  are  used  when  one  or  more  amounts  on  one  side  balance  one  or  more  amounts 
on  the  other  side.  This  applies  to  Personal  accounts.  Notes  Receivable  and  Notes  Payable,  where 
one  or  more  payments  balance  one  or  more  charges  or  credits.  If  either  or  both  sides  have  more 
than  one  amount,  they  are  added  and  the  total  entered  in  small  pencil  figures.  Unless  the  amounts 
are  added,  and  the  total  entered,  the  bookkeeper  might  rule  an  account  that  did  not  balance.  When 
possible,  the  single  lines  should  be  ruled  on  the  same  blue  line  on  each  side. 

^  3.  Single  and  Double  Red  Lines  are  used  when  the  difference  has  been  entered  on  the  smaller 
side,  to  make  the  account  balance,  or  when  there  are  a  number  of  debits  and  credits,  no  one  or  more 
of  which  balance  one  or  more  on  the  other  side.  When  these  are  used,  the  total  of  each  side  is  entered 
in  black  ink  between  the  single  and  double  lines.  As  explained,  the  single  line  is  ruled  across  the  money 
columns  only,  and  double  lines  across  all  except  the  explanation  columns.  Always  rule  the  single 
and  double  lines  on  the  same  blue  line  on  each  side,  no  matter  if  there  is  only  one  entry  on  one  side, 
and  a  number  on  the  other  side. 


54  '^OTH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

FISCAL  PERIOD. 

§  74.  The  Object  of  all  Investments  in  business  is  for  profit,  that  is,  increase  in  the  value  of 
the  property  invested.  Since  this  is  the  object,  it  is  evident  that  every  person  who  invests  property 
in  a  business  enterprise,  will  want  to  know  the  condition  of  the  business  at  least  once  each  year,  and 
to  learn  this,  will  require  the  bookkeeper  to  make  a  statement  showing  the  profits  or  losses  for  the 
period.  The  time  that  elapses  between  the  beginning  of  the  business  and  the  first  statement  of  the 
business,  or  between  the  last  statement  and  the  present  one,  is  the  "Fiscal  Period."  This  may  be  one 
year  or  any  fraction  of  a  year,  depending  upon  the  nature  of  the  business,  and  the  wishes  of  the  investors. 
The  end  of  a  fiscal  period  is  sometimes  called  the  "Closing  time"  because  at  that  time  the  books  are 
closed.  The  current  fiscal  period  is  the  time  that  has  elapsed  since  the  beginning  of  the  business, 
or  the  end  of  the  last  fiscal  period.  To  illustrate:  A.  L.  Jones  invests  $2,000.00  in  the  grocery  business, 
January  i,  191 1.  June  30th  of  the  same  year,  he  wishes  to  know  the  condition  of  the  business,  and 
requires  his  bookkeeper  to  make  a  statement  of  the  business.  At  that  time  the  current  fiscal  period 
is  the  time  between  January  ist  and  June  30th.  At  the  close  of  December  31,  191 1,  he  wishes  to  know 
the  condition  of  the  business,  and  requires  the  bookkeeper  to  make  another  statement.  At  that 
time  the  current  fiscal  period  is  the  time  between  June  30th  and  December  31st,  and  the  previous 
fiscal  period  is  the  one  from  January  ist  to  June  30th. 

At  the  close  of  each  current  fiscal  period,  it  is  necessary  to  "Take  Stock,"  that  is,  ascertain  the 
present  value  of  salable  merchandise  on  hand,  as  this  is  one  of  the  principal  resources  or  assets  of  the 
business.  As  this  requires  considerable  time  and  trouble,  it  is  one  of  the  principal  reasons  why  busi- 
ness men  do  not  require  a  statement  of  the  business  more  than  once  or  twice  each  year, 

INVENTORY. 

§  75.  A  List  of  (a)  the  property  on  hand,  (b)  amounts  due  the  business  for  services  rendered 
but  not  entered  on  the  books,  or  (c)  for  obligations  owed  by  the  business  or  for  services  received  but 
not  paid  for,  is  an  inventory.  The  total  value  of  the  property  is  also  called  an  inventory.  In  every 
mercantile  or  trading  business,  property  is  purchased  for  two  distinct  purposes:  one,  for  sale;  and 
the  other  for  use  in  the  business.  The  value  of  property  purchased  for  sale  will  not  change,  but  the 
value  of  property  purchased  for  use  in  the  business,  will  decrease  on  account  of  its  use.  An  account 
is  kept  with  property  purchased  for  use  in  the  business,  and  this  account  will  show  the  cost  value, 
which  is  the  present  value  if  there  is  no  depreciation.  The  account  or  accounts  kept  with  property 
purchased  for  sale  will  not  show  the  cost  value  of  goods  on  hand,  because  the  property  is  sold  at  a 
greater  price  than  it  cost.  For  this  reason  it  is  necessary  to  go  through  the  stock  and  make  a  list  of 
all  salable  goods  on  hand  at  the  close  of  each  fiscal  period. 

Accounts  may  be  kept  with  each  kind  of  property  purchased  for  sale,  in  such  a  manner  that  the 
difference  of  each  account  will  show  the  present  value  of  the  goods  on  hand.  However,  the  results 
are  seldom  correct  because  goods  are  stolen,  mistakes  made  in  delivery  and  never  reported,  articles 
destroyed  by  clerks  in  preparing  them  for  sale  and  never  reported,  and  various  other  reasohs.  For 
these  reasons  it  is  usually  necessary  to  go  through  the  stock  and  prove  the  correctness  of  these  accounts 
when  kept.  The  keeping  of  these  accounts  is  very  expensive,  and  with  a  few  exceptions  the  business 
men  depend  upon  the  "stock  taking"  at  the  close  of  the  fiscal  period  for  the  value  of  the  goods  on  hand. 

Goods  in  stock  are  always  estimated  at  the  cost  value,  which  is  the  invoice  cost,  plus  the  freight 
and  drayage  charges  for  delivering  the  goods  in  the  store  room.  The  trading  profit,  that  is,  the  profit 
made  by  buying  and  selling  goods,  is  made  by  the  sales  and  not  by  the  increase  in  the  cost  of  the 
articles.  For  this  reason  it  is  always  best  to  use  the  cost  price,  even  though  the  market  price  may  be 
in  advance  of  this.  If  the  market  price  has  advanced,  the  selling  price  will  advance,  and  at  the  close 
of  the  next  fiscal  period  the  profit  will  be  shown.  The  only  exception  to  this  rule  is  when  a  change 
is  being  made  in  the  ownership  of  the  business.     If  one  of  those  interested  in  the  business  is  retiring, 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


55 


it  is  quite  evident  that  he  would  want  the  benefit  of  any  profit  that  was  going  to  be  made  on  account 
of  having  secured  goods  at  reduced  prices.  If  new  capital  is  being  admitted,  those  interested  in  the 
business  will  want  the  benefit  of  the  profit  that  was  going  to  be  made  on  the  goods  that  had  been 
purchased  at  less  than  the  present  market  value.  An  inventory  represents  either  a  resource  (a  and 
b),  or  a  liability  (c). 

§  76.     Resource  Inventory.     If  the  list  represents  property  on  hand,  or  the  cost  value  of 
property  due  the  business,  but  not  entered,  it  is  a  resource  inventory.     Resource  inventories  consist 


^:^^y>^^^^-z^^g^^'?^g^^^^^^^^^^^^g^;?^^<^/^  /^/ 


56 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


of:  (a)  salable  merchandise  on  hand,  (a)  stamps  on  hand,  (a)  advertising  matter  on  hand;  (b)  accrued 
interest  on  Notes  Receivable,  the  interest  on  which  is  not  due  until  the  notes  are  due,  (b)  accrued  in- 
terest on  customers'  past  due  accounts,  (b)  amounts  due  us  for  services  rendered,  but  not  charged. 

§77.  Liability  Inventory.  If  the  list  represents  obligations  due  others  for  services  rendered 
by  them,  it  is  a  liability  inventory.  Liability  Inventories  consist  of,  accrued  interest  on  notes  pay- 
able, the  interest  not  being  due  until  the  notes  are  due;  accrued  interest  on  creditors'  past  due  accounts ; 
rent  unpaid,  pay  roll,  and  any  other  obligations  that  have  not  been  entered  on  the  books. 

QUESTIONS. 


1.  Define  the  Trial  Balance.     (§  66.) 

2.  How   often   is  a  Trial   Balance   taken    in 

business?     (§  68,  ^[lo.) 

3.  Name  the  seven  important  steps  necessary 

for  taking  a  Trial  Balance.     (§  66,  ^^  i 

-7.) 

4.  Why  is  it  best  to  use  a  hard  pencil  and 

keep  it  sharp  when  footing  the  accounts 
in  the  ledger?     (§  67,  ^  2.) 

5.  Why  is  it  best  to  make  small  figures  in 

footing  accounts  in  the  ledger?     (§  67, 

6.  How  are  the  accounts  listed  on  the  Trial 

Balance?      (§66,   ^5.) 

7.  How  does  the  bookkeeper  know  that  his 

Trial   Balance   balances?      (§  67,   ^  15.) 

8.  How  is  the  Trial  Balance  ruled?     (§  67, 

H  i6.)_ 

9.  Name  six  of  the  important  points  about 

taking  a  Trial  Balance.     (§  68.) 

10.  Is  it  necessary  for  the  bookkeeper  to  use 

red  ink?     (§  69.) 

11.  Give  the  three  rules  for  the  use  of  red  ink. 

(§§  70—72.) 

12.  What  do  ruled  lines  indicate  to  the  book- 

keeper?    (§  73.) 

13.  What  is  the  correct  position  of  the  rule 

when  ruling?     (§  73,  ^i.) 

14.  Why  is  it  not  best  to  rule  with  the  brass 

edge  of  the  ruler  on  the  paper?     (§  73, 


15.  What  two  forms  are  usually  used?     (§  73, 

^^  2  and  3.) 

16.  What  is  a  fiscal  period?     (§  74.) 

17.  How  much  time  may  it  cover?     (§  74.) 

18.  What  do  you  understand  by  taking  stock? 

(§  74.) 

19.  Why  is  it  necessary  to  take  stock  at  the 

end  of  a  fiscal  period?     (§  74.) 

20.  Define  an  inventory  and  name  the  three 

kinds  of  property  that  may  be  repre- 
sented.     (§  75.) 

21.  What  is  the  difference  between  property 

purchased  for  sale  and  that  purchased 
for  use  in  the  business?     (§  75.) 

22.  Why  does   the   latter  decrease   in   value? 

(§75-) 

23.  Why  is  it   not  practical   to   keep   special 

accounts  with  each  kind  of  goods  bought 
and  sold  so  that  at  any  time  the  value 
of  the  goods  on  hand  may  be  ascer- 
tained by  taking  the  difference  of  each 
account?     (§  75.) 

24.  At  what  price  are  goods  in  stock  usually 

inventoried?     (§  75.) 

25.  Why  is  it  necessary  to  take  into  consider- 
•    ation   the  amount   paid   for   freight  on 

goods  purchased  in  estimating  the  value 
of  goods  on  hand?     (§  75.) 

26.  Distinguish  between  a  resource  inventory 

and  a  liability  inventory.  (§  §  76  and  77.) 


STATEMENT  OF  THE  BUSINESS. 


§  78.  At  the  Close  of  each  Fiscal  Period,  the  bookkeeper  is  required  to  make  a  statement 
showing  the  present  condition  of  the  business.  This  must  show  all  the  resources,  liabilities,  present 
capital,  profits,  losses,  and  the  net  gain  or  loss.  The  facts  are  obtained  from  the  inventory  and  the 
Trial  Balance.  It  is  customary  to  make  two  distinct  statements — the  Financial  statement,  and  the 
Profit  and  Loss  statement.  The  Financial  statement  is  made  first  and  proved  to  be  correct  by  the 
Profit  and  Loss  statement. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  57 

§  79.  Financial  Statement.  This  shows  a  list  of  the  resources,  liabilities,  and  the  present 
capital.     These  facts  are  shown  in  the  order  mentioned. 

^  I.  The  Resources,  or  assets,  are  listed  in  the  order  of  their  availability,  which  is  as  follows: 
Cash,  Merchandise  Inventory  (salable  goods  on  hand),  Notes  Receivable,  Personal  accounts.  Fixed 
Investments,  and  Sundry  Resource  Inventories.  If  there  are  a  number  of  Personal  accounts  it  is  best 
to  enter  the  total  on  the  Financial  statement,  and  show  the  amount  due  from  each  customer  on  a 
separate  statement.  The  total  of  the  various  resource  accounts  is  the  present  capital,  if  there  are 
no  outstanding  obligations. 

^2.  The  Liabilities  (outstanding  obligations)  are  listed  in  the  following  order:  Notes  Payable, 
Accounts  Payable,  and  Sundry  Liability  Inventories.  The  total  of  these  equals  the  total  liabilities 
or  outstanding  obligations,  which  are  to  be  paid  by  the  business. 

^3.  The  Present  Capital  is  the  difference  between  the  total  liabilities  and  the  total  resources. 
It  is  quite  evident  that  if  the  debts  owed  by  the  business  are  paid,  the  remaining  property  belonging 
to  the  business  is  the  owner's  interest  in  the  business.  If  the  present  capital  is  more  than  the  amount 
invested,  or  the  capital  of  the  owner  at  the  beginning  of  the  fiscal  period,  the  difference  is  the 
profit;  if  it  is  less,  the  difference  is  a  loss.  The  deduction  is  usually  made  at  the  close  of  the  Financial 
statement,  in  order  to  compare  the  net  profit  or  loss  shown  by  this,  with  that  shown  by  the  Profit 
and  Loss  statement. 

NOTE — If  the  owner  has  withdrawn  any  part  of  the  capital  during  the  fiscal  period,  the  balance  of  his  Capital  ac- 
count before  the  books  are  closed  represents  his  interest  in  the  business.  The  difference  between  this  and  the  present 
capital  as  shown  by  the  Financial  statement  is  the  profit  or  loss. 

§  80.  Profit  and  Loss  Statement.  This  shows  the  various  profits,  losses,  and  the  net  profit 
or  loss  for  the  current  fiscal  period.  These  are  listed  in  the  following  order:  Gross  Trading  Profit, 
or  profit  on  merchandise;  other  profits  as  shown  by  the  credit  balance  of  profit  accounts;  the  Oper- 
ating Expense,  as  shown  by  the  Expense  account  or  various  accounts  with  expense;  other  losses,  as 
shown  by  the  debit  balance  of  loss  accounts. 

■  ^  I.  Gross  Trading  Profit.  This  is  the  profit  made  by  buying  and  selling  merchandise.  The 
amount  is  ascertained  by  the  Trading  statement,  which  may  be  made  a  part  of  the  Profit  and  Loss 
statement,  or  as  a  separate  statement.  It  shows  the  returns  from  the  sales  of  merchandise,  the  cost 
of  merchandise  for  the  current  fiscal  period,  the  cost  of  merchandise  on  hand  at  the  beginning  of  the 
fiscal  period,  the  cost  of  merchandise  on  hand  at  the  end  of  the  fiscal  period,  the  net  cost  of  goods 
sold,  and  the  net  profit  on  sales  of  merchandise.  Unless  there  are  a  number  of  accounts  represented 
on  the  Trading  statement,  it  is  best  to  make  it  a  part  of  the  Profit  and  Loss  statement. 

^  2.  Other  Profits.  These  are  represented  by  the  credit  balances  of  profit  accounts,  and  may  be, 
Interest,  Discount,  Commission,  Shipments,  Income  from  Real  Estate,  etc.  (If  the  debit  side  of 
these  accounts  are  the  larger,  they  are  listed  with  the  losses.) 

^  3.  Operating  Expense.  This  is  represented  by  one  Expense  account,  or  the  various  accounts 
with  expense.  The  total  is  the  operating  expense,  or  the  cost  of  conducting  the  business  for  the  fiscal 
period. 

^  4.  Other  Losses.  These  are  represented  by  the  debit  balances  of  loss  accounts,  and  may  be. 
Interest,  Discount,  Commission,  Shipments,  etc.  (If  any  of  these  accounts  show  a  credit  balance, 
they  are  listed  with  the  profits.) 

^5.  The  Total  Profit  is  the  gross  trading  profit  (^  i)  plus  the  other  profits  (1[  2).  The  total 
loss  is  the  operating  expense  (^  3)  plus  the  other  losses  (^  4).  The  net  profit  or  loss  is  the  difference 
between  the  total  profits  and  losses,  or  losses  and  profits.  This  net  profit,  or  loss,  must  be  the  same 
as  the  difference  between  the  present  capital,  and  the  capital  at  the  beginning  of  the  fiscal 
period. 

No  facts  shown  by  either  the  Financial,  Trading,  or  Profit  and  Loss  statements  can  be  accepted 
as  correct  until  the  final  results  have  been  proved. 


58 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  81.  Instructions  for  making  the  Financial,  and  Profit  and  Loss  Statements,  January 
31st.  As  explained  in  §  78,  these  statements  are  made  from  the  Trial  Balance  and  Inventory.  The 
Trial  Balance,  illustration  No.  17,  shows  the  condition  of  the  ledger  at  the  close  of  the  fiscal  period 
(January  31st) ;  and  the  Inventory,  illustration  No.  18,  the  value  Of  merchandise  on  hand.  By  referring 
to  the  Trial  Balance,  illustration  No.  17,  the  student  will  note  the  following: 

The  first  account  is  the  investment,  and  is  neither  a  resource  nor  a  liability.  The  second.  Cash, 
shows  the  money  on  hand,  which  is  a  resource.  The  third,  Merchandise,  shows  the  value  of  goods 
bought  and  sold,  but  not  on  hand;  hence  the  inventory,  which  does  show  the  value  of  the  goods  on 
hand,  must  be  used  in  listing  the  resources.  The  next.  Expense,  is  a  loss,  because  it  shows  money 
paid  for  conducting  the  business.  All  the  remaining  accounts  are  with  persons.  Those  in  which 
the  debit  side  is  larger  show  a  resource,  and  those  in  which  the  credit  side  is  larger,  a  liability. 


Illustration  No.  19. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


59 


^  I.  Financial  Statement.  On  the  blue  line  at  the  top  of  a  sheet  of  journal  paper,  write  "Financial 
Statement,  W.  H.  Goodwin,  January  31,  191.  ."  On  the  first  blue  hne  below  the  heavy  line,  in  the 
center,  write  "Resources."  Next  list  the  resources  in  the  following  order:  Cash,  as  shown  on  the 
Trial  Balance,  Merchandise  as  shown  on  the  inventory,  and  Personal  acco  unts  in  which  the  debit 
side  is  the  larger.  Enter  the  amounts  as  shown  in  illustration  No.  19.  The  total  will  be  the  value 
of  all  the  resources,  and  is  extended  in  the  second  column  on  the  line  below.  At  the  left  of  the  total, 
write  "Total  Resources."  (See  illustration  No.  19.)  Check  each  account  on  the  Trial  Balance  as  the 
balance  is  transferred  to  the  statement. 

In  the  center  of  the  page,  and  below  the  total  resources,  write  "Liabilities."  On  the  next 
blue  line,  and  at  the  left,  write  "Personal  Accounts;"  on  the  blue  lines  below  write  the  names  of  the 
five  Personal  accounts  that  show  a  credit  balance,  in  the  same  order  as  they  appear  on  the  Trial  Bal- 
ance. See  second  part  of  illustration  No.  19  for  arrangement.  Check  the  accounts  on  the  Trial  Bal- 
ance as  the  entries  are  made.  The  total  of  these  five  amounts  is  the  amount  of  Mr.  Goodwin's  indebted- 
ness, and  is  extended  into  the  second  column,  on  the  line  below.  At  the  left  of  the  total,  write  "To- 
tal Liabilities."  The  difference  between  the  total  resources  and  the  total  liabilities  must  be  the  Present 
Net  Capital.  The  difference  between  this  and  the  investment  is  the  net  gain.  See  illustration  No. 
19  for  form  and  method  of  ruling. 

^  2.  Profit  and  Loss  Statement.  At  the  top  of  another  sheet  of  journal  paper,  or  on  the  lower 
half  of  the  sheet  used,  write  "Profit  and  Loss  Statement,  W.  H.  Goodwin,  January  31,  191.." 
On  the  first  blue  line  below  the  red  line,  in  the  center  of  the  page,  write  "Gains."  Since  one 
of  the  principal  sources  of  profit  is  the  Merchandise  account,  and  as  the  profit  on  this  is  shown  by  the 
Trading  statement,  make  this  statement  first.  As  explained,  this  can  be  made  on  a  separate  sheet 
of  paper,  or  on  the  same  sheet  with  the  Profit  and  Loss  statement.  Since  at  this  time,  this  is  the  only 
profit,  it  is  better  to  make  the  two  statements  together.  Below  the  word  "Gains,"  and  at  the  left,  write 
"Merchandise  Sales;"  and  in  the  first  column,  the  total  credit  side  of  the  Merchandise  account,  which 
is  the  sales  for  the  period.  Below  this  write  "Merchandise  Purchases;"  and  just  to  the  left  of  the 
first  money  column,  write  the  debit  side  of  the  Merchandise  account,  which  is  the  total  purchases 
to  date.  On  the  next  blue  line,  write  "Less  Inventory,  January  31,"  and  place  the  amount  of  the 
inventory  under  the  purchases.     Subtract  the  two  and  extend  the  difference  into  the  first  money 


^//^/ 


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^'Z^i^^-'^^l.'di^ 


Illustration  No.  20. 


/^.?/ 


6o  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

column  on  the  line  below.  At  the  left  of  the  amount  write,  "Net  cost  of  Merchandise  sold." 
If  $1,276.70  was  paid  for  merchandise,  and  there  is  yet  on  hand  $882.46,  according  to  the 
inventory,  the  cost  of  goods  sold  must  be  the  difference;  which,  in  this  case,  is  $394.24.  The 
difference  between  the  amount  received  for  goods  sold  and  the  cost  of  the  goods  sold,  must  be  the  gross 
trading  profit,  or  the  profit  made  by  buying  the  goods  at  one  price,  and  selling  them  at  a  greater. 
Subtract  the  cost  of  goods  sold  from  the  total  sales,  and  enter  the  amount  in  the  second  column  on  the 
line  below.  At  the  left,  and  on  the  same  line  with  this  amount,  write  "Profit  on  Merchandise  sold." 
There  is  no  other  account  showing  a  profit. 

On  a  blue  line  below,  and  in  the  center  of  the  page,  write  "Losses."  On  a  blue  line 
below  this,  and  to  the  left,  write  "Expense,"  and  extend  the  amount  into  the  second  money  column. 
The  gross  trading  profit,  less  the  expense  of  conducting  the  business,  must  be  the  net  profit.  Subtract 
the  amount  of  the  expense  from  the  gross  trading  profit,  and  place  the  amount  in  the  second  column, 
underneath  the  last  entry.  To  the  left  write,  "Net  Gain."  This  is  $182.81.  See  illustrations  Nos.  19 
and  20  for  arrangement  and  form  of  ruling.  By  referring  to  the  Financial  statement,  the  student  will 
note  that  the  difference  between  the  amount  invested  and  the  Present  Net  Capital  is  the  same  as  the 
difference  between  the  gains  and  losses,  which  is  proof  that  the  work  is  correct.  See  illustration  No.  20. 

§  82.  The  Balance  Sheet.  This  is  another  form  of  the  Financial,  and  Profit  and  Loss  state- 
ments, one  which  is  very  popular  with  bookkeepers.  It  is  shown  here  more  for  comparison,  as  it  is 
better  practice  to  use  the  Financial,  and  Profit  and  Loss  statements,  because  more  detailed  results 
can  be  shown  by  the  separate  statements.  The  Balance  Sheet  is  ruled  with  six  money  columns;  two 
for  the  debits  and  credits  of  the  Trial  Balance,  two  for  the  Profit  and  Loss  statement,  two  for  the 
Financial  statement.  The  Profit  and  Loss  statement  is  given  first  on  account  of  the  ruling  at  the 
bottom.  The  Trading  statement  is  shown  separate,  and  below  the  final  ruling  on  the  Balance  Sheet. 
If  there  are  a  number  of  accounts  involved,  it  is  better  to  make  this  statement  on  a  separate  sheet 
of  paper.  The  Financial  statement  is  shown  in  the  last  two  columns.  Resource  inventories  are  en- 
tered in  the  Resources  column,  and  Liability  inventories  in  the  Liabilities  column,  each  with  red  ink. 
The  final  results  are  shown  at  the  bottom.    See  illustration  No.  21. 

^i .  Instructions  for  making  a  Balance  Sheet.  Write  the  names  of  the  accounts  as  they  appear  on  the 
Trial  Balance  at  the  left,  and  place  the  debits  and  credits  in  the  two  columns  provided  for  them. 
Write  the  Inventory  of  Merchandise  in  red  ink  in  the  Resources  column.  Rule  the  Trial  Balance 
with  single  and  double  lines,  and  place  the  totals  between  the  two.  Extend  the  losses  into  the  Losses 
column,  the  profits  into  the  Profits  column,  the  resources  into  the  Resources  column,  and  the  lia- 
bilities into  the  Liabilities  column.  The  Trading  statement  is  made  at  the  bottom  of  the  Balance 
Sheet,  or  on  a  separate  sheet  of  paper.  Foot  all  the  columns  on  the  line  with  the  footings  of  the  Trial 
Balance,  and  draw  a  single  red  line  all  the  way  across;  this  is  a  continuation  of  the  single  red  line 
under  the  Trial  Balance.  The  difference  between  the  Profit  and  Loss  columns  is  entered  in  red  ink, 
and  these  columns  footed  and  ruled.  The  net  gain  is  added  to  the  investment,  and  the  total  of  the 
two,  which  is  the  present  net  capital,  is  entered  with  red  ink,  in  the  Liability  column,  because  the 
difference  between  the  resources  and  liabilities  is  the  present  net  capital.  These  columns  are  ruled 
and  the  footings  entered.     Illustration  No.  21  shows  the  form  of  Balance  Sheet  for  January  31st. 

NOTE. — The  term  "Balance  Sheet"  is  used  here  because  this  form  is  known  by  that  name  by  many  teachers  and  bookkeep- 
ers.   Accountants  do  not  use  a  name  to  designate  forms  and  usually  refer  to  the  Financial  Statement  as  the  Balance  Sheet. 

§  83.     Important  Points  about  the  Financial,  and  Profit  and  Loss  Statements. 

FIRST:    The  Financial  statement  shows  the  resources,  liabilities  and  present  capital. 

SECOND :  The  Resources,  in  a  mercantile  or  trading  business,  usually  consist  of  cash ;  merchandise, 
per  inventory;  debts  due  the  business,  represented  by  either  notes  or  personal  accounts;  the  value  of 
property  purchased  for  use  in  the  business;  debts  due  the  business  that  do  not  appear  on  the  books. 

(Continued  on  page  62.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  2i. 


To  the  student:  You  must  understand  the  Statement  form  (§  8i)  and  the  Balance  Sheet 
form  (§  82)  of  the  statement  of  the  business.  Unless  you  can  make  both,  you  do  not  understand 
either.  We  suggest  that  you  make  both  in  all  the  Part  i  work,  including  those  required  in  the 
regular  bookkeeping  work  and  the  supplementary  exercises. 


62 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


THIRD:  The  Liabilities  consist  of  the  obligations  owed  by  the  business  as  represented  by 
written  and  verbal  promises  (Notes  Payable  and  Accounts  Payable). 

FOURTH:  The  difference  between  the  resources  and  liabilities  is  the  present  capital,  or  the 
owner's  interest  in  the  business. 

FIFTH:  The  Profit  in  a  trading  business  will  consist  of  the  gain  on  merchandise,  as  shown 
by  the  trading  statement,  and  other  gains  shown  by  profit  or  loss  accounts  that  have  a  credit  balance. 

SIXTH:  The  Trading  statement  is  made  up  from  all  the  accounts  that  affect  the  purchases  and 
sales  of  merchandise,  and  the  inventory  of  salable  goods  on  hand. 

SEVENTH:  The  gross  trading  profit  and  other  gains,  as  shown  by  the  credit  side  of  profit 
or  loss  accounts,  equal  the  total  gain  for  the  fiscal  period. 

EIGHTH:  The  Losses  are  represented  by  the  Expense  account  or  accounts,  and  the  other  losses 
shown  by  the  debit  balance  of  profit  or  loss  accounts. 

NINTH:  The  difference  between  the  total  gains  and  total  losses  is  the  net  gain  for  the  period. 
This,  added  to  the  net  investment,  is  the  present  capital,  and  must  be  the  same  as  the  difference  be- 
tween the  resources  and   liabilities  on  the  Financial  statement. 

TENTH :  No  facts  set  forth  in  either  statement  can  be  accepted  as  correct  until  the  results  have 
been  proved. 

ELEVENTH:  The  statements  are  made  up  from  the  Trial  Balance  and  Inventory  or  Inven- 
tories.   Statements  are  made  at  the  end  of  each  fiscal  period,  which  may  be  one  year  or  a  part  of  a  year. 

TWELFTH:  The  accounts  on  the  Trial  Balance  should  be  checked  as  they  are  entered  on  the 
proper  statement;  when  both  statements  have  been  completed,  all  the  accounts  on  the  Trial  Balance 
will  be  checked. 

QUESTIONS. 


1.  Why  is  it  necessary  for  the  bookkeeper  to 

make  a  statement  of  the  business  at  the 
close  of  the  fisqal  period?     (§  78.) 

2.  What  two  statements  are  usually  made? 

(§  78.) 

3.  Define  the  Financial  statement.     (§  79.) 

4.  How  are  the  assets  arranged?     (§  79,  T[  i.) 

5.  What    do     the     total     assets     represent? 

(§  79,  If  I.) 

6.  How  are  the  liabilities  arranged?     (§  79, 

1[2.) 

7.  What     do     the     total     liabilities    show? 

(§  79.  H  2.) 

8.  How    is  the  present  capital  ascertained? 

(§79,113.) 

9.  What  does  the  difference  of  the  net  capital 

at  the  beginning  of  the  fiscal  period  and 
the  present  capital  show?    (§  79, 1[  3.) 

10.  Define    the    Profit    and    Loss    statement. 

(§  80.) 

11.  What  must  it  show?    (§80.) 

12.  What  is  meant  by  the  gross  trading  profit? 

(§80,   II  I.) 

13.  What  is  the  Trading   statement?     (§  80, 

If  I.) 


14 
15 
16 

17 

18 

19 
20 

21. 

22. 
23- 


24. 

25- 


What  accounts  are  represented  on  it? 
(§  80,   II  I.) 

Is  it  a  part  of  the  Profit  and  Loss  state- 
ment or  separate?     (§  80,  H  i.) 

What  other  profits  may  appear  on  the  Prof- 
it and  Loss  statement?    (§  80,  ^  2.) 

What  constitutes  the  total  profits?  (§  80, 
HH  I  and  2.) 

What  are  the  operating  expenses?     (§  80, 

If  3-) 
What  other  losses  may  occur?    (§  8o,1I  4.) 
How  is  the  net  gain  ascertained?     (§  80, 

If  5-) 
How  does  the  bookkeeper  know  that  the 

net  gain  ascertained  by  the  Profit  and 

Loss  statement  is  correct?     (§  80, If  5.) 
Why  is  it  necessary  for  the  two  statements 

to  prove?     (§  79,  §  80.) 
What  is  the  difference  between  a  Balance 

sheet  and  the  Financial,  and  Profit  and 

Loss  statements?     (§  82.) 
Which  form  is  the  best? 
Name  five  of  the  important  points  about 

the    Financial,    and     Profit    and     Loss 

statements.      (§  83.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  63 

CLOSING  THE  LEDGER. 

§  84.  At  the  Close  of  the  Fiscal  Period,  after  the  Financial,  and  Profit  and  Loss  statements 
have  been  made,  and  proved  to  be  correct,  those  accounts  in  the  ledger  that  represent  profits  or  losses 
are  closed.  The  balance  of  each  is  transferred  to  the  Profit  and  Loss  account.  The  difference  of  this 
account  will  show  the  same  net  gain  or  loss  as  is  shown  by  the  Profit  and  Loss  statement.  The  dif- 
ference of  the  Profit  and  Loss  account  is  closed  into  the  Investment  account,  and  this  account  is  closed, 
and  the  present  capital  brought  down  on  the  credit  side.  The  amount  of  this  is  the  same  as  that 
shown  in  the  Financial  statement.  After  the  ledger  has  been  closed,  there  will  be  no  accounts  open 
except  those  whose  balance  shows  a  resource  or  a  liability,  and  the  one  showing  the  present 
capital.  In  other  words,  after  the  ledger  is  closed,  there  are  no  accounts  open  except  those  shown 
on  the  Financial  statement. 

^  I.  There  are  two  methods  of  closing  the  ledger:  (a)  One,  by  the  use  of  red  ink,  and  the  other, 
(b)  by  a  journal  entry  or  entries.  The  red  ink  method  will  be  used  in  this  set.  While  it  is  better  prac- 
tice to  use  the  journal  method,  yet  the  student  should  understand  both. 

§  85.  Closing  a  Profit  or  Loss  Account.  To  close  a  profit  or  loss  account  is  to  transfer  the 
balance  to  some  other  account.  Since  closing  the  ledger  means  to  close  the  accounts  used  in  making 
up  the  Profit  and  Loss  statement,  it  is  necessary  to  understand  the  method  of  closing  an  account, 
in  order  to  close  the  ledger.  There  are  two  classes  of  accounts  represented  on  the  Profit  and  Loss 
statement:  (a)  profit  or  loss  accounts  that  have  an  inventory;  (b)  profit  or  loss  accounts  that  have 
no  inventory.  When  red  ink  is  used  in  closing  the  ledger,  the  following  instructions  give  detailed  in- 
formation for  closing  each  class  of  accounts. 

§  86.     To  Close  a  Profit  or  Loss  Account  that  has  an  Inventory,  proceed  as  follows: 

^  I.  Enter  the  Resource  Inventory  on  the  credit  side  with  red  ink,  as  follows:  the  date,  the 
word  "Inventory,"  and  the  amount.     Make  this  entry  on  the  next  blue  line  below  the  last  entry. 

^  2.  Add  the  Amount  of  the  Inventory  to  the  pencil  figures  above,  and  enter  this  total  in  small 
pencil  figures  just  below  the  red  ink  entry.  ^ 

^  3.  On  the  Smaller  Side,  enter,  with  Red  Ink,  the  difference  between  the  two  sides  of  the  account 
after  the  inventory  has  been  added,  as  follows:  the  date,  the  name  of  the  account  to  which  the  balance 
is  transferred,  page  of  this  account  in  the  ledger,  and  the  amount.  Write  this  on  the  first  blue  line 
below  the  last  entry. 

If  the  account  shows  a  loss,  the  inventory  and  loss  will  both  appear  on  the  credit  side;  if  it  shows 
a  gain,  the  inventory  will  appear  on  the  credit  side,  and  the  gain  on  the  debit  side. 

^4.  Add  the  Amount  of  the  Balance  to  the  total  of  the  side  on  which  it  is  entered,  and  place 
this  new  total  just  beneath  the  red  ink  figures  in  small  pencil  figures.  This  total  should  be  the  same 
as  the  pencil  figures  on  the  other  side  of  the  account. 

^  5.  Rule  the  Account  as  follows:  Draw  a  single  red  line  across  the  dollars  and  cents  columns 
on  each  side;  this  line  is  ruled  on  the  blue  line,  just  beneath  the  last  entry  on  the  side  which  has  the 
larger  number  of  entries,  and  is  drawn  on  the  same  blue  line  on  each  side.  On  the  next  blue  line  be- 
low this,  draw  double  red  lines  across  all  the  columns  except  those  for  the  explanation.  Write,  with 
black  ink,  in  the  amount  columns  between  the  single  and  double  lines,  the  totals  on  each  side,  which 
will  be  the  same  as  the  last  pencil  figures.  The  amounts  written  in  the  money  column  on  each 
side  must  be  the  same. 

^  6.  Bring  down  the  Inventory  on  the  Opposite  Side  in  black  ink,  writing  the  date  (day  follow- 
ing the  closing),  the  word  "Inventory,"  and  the  amount;  make  this  entry  on  the  first  blue  line  beneath 
the  double  ruled  lines. 

\  7.  Turn  to  the  Account  in  the  Ledger  to  which  the  balance  is  to  be  transferred;  and  on  the  op- 
posite side  from  which  the  red  ink  balance  is  entered,  write  in  black  ink,  the  date,  the  name  of  the  ac- 
count closed,  page  in  the  ledger  and  the  amount  of  the  difference  between  the  two  sides.  (See  il- 
lustrations Nos.  4  and  6.) 


64  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  • 

^8.  If  an  Account  has  a  Liability  Inventory,  it  is  entered  on  the  debit  side,  and  the  account  is 
closed  in  exactly  the  same  manner  as  described  above.  It  is  possible  for  an  account  to  have  both  a 
resource  and  a  liability  inventory;  it  is  also  possible  that  the  inventory  and  difference  may  both  ap- 
pear on  the  same  side  of  the  account.  This  will  be  explained  when  it  is  necessary  for  the  student  to 
close  an  account  under  these  conditions. 

§  87.     To  Close  a  Profit  or  Loss  Account  that  does  not  have  an  Inventory: 

^  I.  On  the  Smaller  Side  write,  with  Red  Ink,  the  date,  name  of  the  account  to  which  the  bal- 
ance is  to  be  transferred,  and  the  balance  (difference  between  the  two  sides).  Rule  the  account  with 
single  and  double  lines,  and  enter  the  totals  as  explained  in  §  86,  ^  5.    See  illustration  No.  5. 

^  2.  Turn  to  the  Account  into  which  the  Balance  is  Closed,  and  on  the  opposite  side,  in  black 
ink,  write  the  date,  name  of  the  account  closed,  page  in  the  ledger,  and  the  amount.  See  illustration 
No.  6. 

§  88.  To  Close  a  Resource,  Liability,  or  Investment  Account.  Resource  or  LiabiHty  ac- 
counts are  not  closed  unless  they  balance  by  payment,  or  unless  desired  to  close  the  account  and  bring 
the  balance  down  on  the  same  page  or  forward  it  to  a  new  page. 

^  I.  When  a  Resource  or  Liability  Account  Balances  by  payment,  rule  with  single  or  double 
red  lines,  as  explained  in  "Ruling  Personal  Accounts,"  §  62.  If  more  than  one  payment  balances 
one  or  more  debits  or  credits,  foot  with  pencil  to  prove  that  they  are  equal. 

^2.  When  a  Resource  or  Liability  Account  is  made  to  Balance,  enter  the  balance  as  follows: 
The  date,  the  word  "balance,"  the  page  (if  transferred  to  a  new  page)  and  the  amount.  Rule  and  foot 
the  account  as  instructed,  §  86,  ^  5.  Enter  the  balance  below  the  ruled  lines  in  black  ink.  If  trans- 
ferred to  a  new  page,  indicate  (in  the  folio  column)  the  page  on  which  the  account  was  located.  If 
entered  on  the  same  page,  place  a  check  mark  in  the  folio  column  in  both  the  red  and  black  ink  entries. 

^3.  To  close  the  Investment  Account.  When  the  Profit  and  Loss  account  is  closed,  the  In- 
vestment account  is  credited  with  the  net  gain  for  the  current  fiscal  period,  or  debited  with  the  net  loss. 
The  difference  of  the  account  will  be  the  present  capital,  which  is  shown  on  the  Financial  statement. 
This  is  entered  on  the  debit  side  with  red  ink  as  follows:  the  date,  which  is  the  last  day  of  the  current 
fiscal  period;  the  words  "Present  Capital"  and  the  amount,  which  must  be  the  same  as  the  present 
capital,  as  shown  by  the  Financial  statement.  The  account  is  ruled  and  footed  as  explained  in  §  86, 
Tf  5.  On  the  credit  side,  on  the  first  blue  Hne  below  the  ruling,  enter  with  black  ink  as  follows:  the 
date,  which  is  the  date  of  the  next  day,  or  the  first  day  of  the  new  fiscal  period;  the  words  "Present 
Capital,"  and  the  amount.  It  is  not  necessary  to  write  the  number  of  the  page  in  the  page  column, 
unless  it  is  transferred  to  a  new  page.  In  this  case,  the  new  page  is  shown  in  the  red  ink  entry,  and 
the  old  page  in  the  black  ink  entry. 

§  89.  Instructions  for  Closing  the  Ledger,  January  31st.  There  are  only  four  accounts  to 
close:  Merchandise  into  Profit  and  Loss;  Expense  into  Profit  and  Loss;  Profit  and  Loss  into  W.  H. 
Goodwin;  and  W.  H.  Goodwin  closed,  and  the  balance  brought  down  as  "Present  Capital."  Close 
the  Merchandise  account,  as  instructed  in  §  86,  and  §  31,  ^  10.  See  illustration  No.  4.  Close  the  Ex-, 
pense  account  as  instructed  in  §  87,  and  §  32,  f  6.  See  illustration  No.  5.  Close  the  Profit  and  Loss 
account  as  instructed  in  §  33,  •[[  6.  See  illustration  No.  6.  Close  W.  H.  Goodwin's  account  as  in- 
structed in  §  88,  ^  3,  and  §  34,  ^  10.     See  illustration  No.  7. 

§  90.  Proof  Sheet.  After  all  the  accounts  in  the  ledger  that  show  a  profit  or  loss  have  been 
closed,  and  the  Profit  and  Loss  account  closed  into  the  Investment  account,  and  this  account  ruled 
and  the  Present  Capital  brought  down,  the  bookkeeper  should  take  a  Trial  Balance  to  prove  that  the 
work  has  been  done  correctly.  See  Illustration  No.  22.  This  Trial  Balance  is  usually  called  the 
"Proof  Sheet"  or  "Balance  of  Balances."  It  contains  all  of  the  accounts  that  are  open  on  the  ledger. 
As  no  personal  accounts  have  been  closed,  the  totals  used  in  making  up  the  Financial  statement  can 
be  substituted  for  the  individual  accounts.  The  Proof  Sheet  will  always  show  the  same  accounts  and 
same  amounts  as  those  in  the  Financial  statement. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


65 


'<^/,  /f/ 


t^cf(?    ^  ^ 


?-7  re 


£ 


Illustration  No.  22. 


-2  /  /->2  /^/ 


-4X^ 


^J^ 


^  i 


§  91.     Important  Points  about  Closing  the  Ledger. 

FIRST:    Closing  the  ledger  means  closing  all  those  accounts  that  show  a  profit  or  a  loss. 

SECOND:   The  ledger  may  be  closed  by  the  red  ink  method,  or  a  journal  entry  or  entries. 

THIRD:   The  accounts  closed  are  those  listed  on  the  Profit  and  Loss  statement. 

FOURTH :   All  the  accounts  showing  a  profit  or  loss  are  closed  into  the  Profit  and  Loss  account. 

FIFTH:  If  an  account  has  a  resource  inventory,  it  is  entered  on  the  credit  side  in  red  ink,  the 
balance  entered  on  the  smaller  side  in  red  ink,  the  account  ruled  and  footed,  the  balance  transferred 
to  the  Profit  and  Loss  account,  and  the  inventory  brought  down  on  the  debit  side  in  black  ink. 

SIXTH:  If  there  is  no  inventory,  the  balance  is  entered  in  red  ink  on  the  smaller  side,  the  ac- 
count ruled  and  footed,  and  the  balance  transferred  to  the  opposite  side  of  the  Profit  and  Loss  account, 
in  black  ink. 

SEVENTH:    The  Profit  and  Loss  account  is  closed  into  the  Investment  account. 

EIGHTH:  The  Investment  account  is  closed  by  writing,  on  the  debit  side  in  red  ink,  the  date 
of  closing,  "Present  Capital,"  and  the  amount.  The  account  is  ruled,  footed  in  black  ink,  and 
the  Present  Capital  brought  down  on  the  credit  side  in  black  ink,  under  date  of  the  day  following 
the  closing,  which  is  the  first  day  of  the  new  fiscal  period. 

NINTH:  The  Proof  Sheet  is  taken  after  the  ledger  has  been  closed,  and  is  to  prove  that  the 
closing  has  been  done  correctly. 

TENTH:  The  accounts  on  the  Proof  Sheet  will  be  the  same  as  those  on  the  Financial  statement. 
The  debits  being  the  Same  as  the  resources,  and  the  credits  the  same  as  the  liabilities  and  the  Present 
Capital. 


66 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


QUESTIONS. 

1.  Why  is  the  ledger  closed?    (§  84.)  13. 

2.  What    classes    of    accounts    are    closed? 

(§§  23—25.)  14. 

3.  What  are  Profit  accounts?    Loss  accounts? 

(§  84.)  15. 

4.  What   is   the    Profit   and    Loss   account? 

(§  33.)  ^  16. 

5.  Into  what  account  is  the  balance  of  the 

Profit  and  Loss  account  closed?    (§  84.) 

6.  After  the  ledger  is  closed  what  accounts  17. 

remain   open?      (§  84.) 

7.  How  many  methods  .are  there  of  closing  18. 

the  ledger?     (§  84,  ^  i.) 

8.  What  is  meant  by  closing  a  profit  or  loss  19. 

account?     (§  85.) 

9.  What  two  classes  of  profit  or  loss  accounts  20. 

are  closed?    (§  85.) 

10.  Name  the  seven  steps  for  closing  a  Profit  21. 

and   Loss  account  that  has  an   inven- 
tory.    (§  86,  IfH  I— 7-)  _  22. 

11.  If  a  Profit  and  Loss  account  has  a  liability 

inventory,  where  is  it  entered?     (§  86  23. 

18.) 

12.  If  a  Profit  and  Loss  account  with  a  re-  24. 

source  inventory  shows  a  loss,  on  which 

side  are  the  red  ink  entries  made?     (§  86,  25. 

UK  I  and  3.) 


How  is  a  Profit  and  Loss  account  that 
does  not  have  an  inventory  closed?  (§87.) 

What  is  a  Resource  account?  (§21.)  A 
Liability  account?     (§  22.) 

Will  a  Resource  or  Liability  account  bal- 
ance without  closing?     (§  88.) 

Describe  the  method  of  closing  a  Re- 
source or  Liability  account  when  it  bal- 
ances without  closing.     (§  88,   T[  i.) 

Describe  the  method  when  it  is  made  to 
balance.     (§  88,  If  2.) 

Describe  the  method  of  closing  the  Invest- 
ment account.     (§  88,  ^  3.) 

How  many  accounts  are  closed  January 
31st?     (§89.) 

After  the  ledger  is  closed  January  31st, 
what  is  Mr.  Goodwin's  present  capital? 

How  do  you  know  that  this  amount  is 
correct?     (§  80,   ^5.) 

What  is  the    object  of  the    proof    sheet? 

(§  90.) 
What    accounts    are    represented    on    it? 

(§  90.) 
Name  six  of  the  important  points  about 

closing  the  ledger.     (§  91.) 
Which  method  of  closing  is  used  in  this  set? 

(§  84,  H  I.) 


§  92.     Important   Facts   Learned   from   Recording  the  Transactions  in  January.  To 

the  beginning  student,  all  the  facts  set  forth  in  the  preceding  work  are  more  or  less  confusing  because 
it  is  difficult  for  him  to  see  the  connection  between  the  different  transactions,  accounts,  illustrations, 
explanations,  etc.     For  this  reason  we  give  below  a  brief  outline  of  what  he  should  have  learned. 

FIRST:  No  transactions  are  recorded  in  the  books  by  the  bookkeeper  except  those  represented 
by  business  papers  or  the  instructions  of  the  owner. 

SECOND:  Transactions  are  recorded  in  the  book  of  original  entry  as  they  occur  and  later 
transferred  to  the  ledger,  which  is  the  book  of  complete  entry. 

THIRD:  The  journal  is  the  only  book  of  original  entry  in  which  all  of  the  transactions  can  be 
recorded,  and  shows  the  account  or  accounts  debited  and  credited. 

FOURTH:  There  are  four  steps  necessary  to  record  a  transaction  in  the  journal:  First,  the  date; 
second,  the  name  of  the  account  debited  and  the  amount;  third,  the  name  of  the  account  credited 
and  the  amount;  fourth,  the  explanation  or  information  for  the  auditor  or  any  one  who  may  have 
the  authority  to  investigate  the  books. 

FIFTH :  Debit  amounts  are  entered  in  the  first  column,  and  credit  amounts  in  the  second  column, 
the  name  of  the  account  being  written  on  the  same  line  with  the  amount,  and  at  the  left.  The  ac- 
count to  be  debited  is  written  on  the  first  line  below  the  date,  and  the  account  to  be  credited  is 
written  below,  and  about  one-half  inch  to  the  right  of  that  debited. 

SIXTH:  The  explanation  must  be  brief  but  clear,  and  is  written  on  the  line  or  lines  just  below 
the  name  of  the  account  credited.  If  a  business  paper  represents  the  transaction,  the  explanation 
must  name  the  paper  so  that  the  auditor  will  know  where  to  look  for  it. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  67 

SEVENTH:  Transferring  amounts  from  the  journal  to  the  proper  account  in  the  ledger  is  called 
posting. 

EIGHTH:  The  posting  is  checked  in  order  to  detect  errors.  The  checking  is  usually  done 
the  next  day  after  the  posting. 

NINTH:  The  Trial  Balance  proves  that  all  debit  amounts  have  been  posted  to  the  debit  side 
of  the  ledger,  and  all  credit  amounts  to  the  credit  side  of  the  ledger,  but  does  not  prove  that  the 
amounts  are  all  posted  to  the  correct  accounts.     Errors  of  this  kind  can  be  discovered  only  by  checking. 

TENTH :  The  profit  for  any  fiscal  period  can  not  be  estimated  until  a  complete  list  of  all  goods 
on  hand  has  been  made,  and  their  value  determined.     This  list  is  the  inventory. 

ELEVENTH :  Goods  are  inventoried  at  the  cost  price,  which  is  the  price  shown  in  the  invoice, 
plus  any  freight  or  drayage  charges  necessary  to  get  them  to  the  storeroom. 

TWELFTH:  The  Financial  statement  is  a  list  of  all  the  resources  and  liabilities,  and  the  dif- 
ference between  these  is  the  investor's  present  capital. 

THIRTEENTH:  The  Resources  consist  of  the  cash,  goods  on  hand  (merchandise  inventory), 
and  Personal  accounts  (debts  due  the  business).  The  Liabilities  consist  of  the  Personal  accounts 
(debts  owed  by  the  business). 

FOURTEENTH:  The  Profit  and  Loss  statement  shows  the  profit  made  by  buying  and  selling 
merchandise,  and  the  expense  necessary  to  conduct  the  business.  The  difference  between  these  two 
is  the  net  gain. 

FIFTEENTH:  The  correctness  of  the  two  statements  is  proved  by  the  fact  that  the  dif- 
ference between  the  gains  and  losses,  as  shown  on  the  Profit  and  Loss  statement,  is  exactly  the  same 
as  the  difference  between  the  investment  and  the  present  capital,  as  shown  on  the  Financial  statement. 

SIXTEENTH:  The  ledger  is  closed  in  order  that  the  gain  may  be  credited  to  the  Investment 
account. 

SEVENTEENTH:  Accounts  showing  a  profit  are  closed  into  the  credit  side  of  the  Profit  and 
Loss  account,  and  those  showing  a  loss  are  closed  into  the  debit  side  of  this  account;  the  difference 
of  this  account  being  closed  into  the  Investment  account. 

EIGHTEENTH:  The  Investment  account  is  closed  and  the  balance  brought  down  on  the  credit 
side  in  black  ink  under  the  next  date  after  the  closing. 

NINETEENTH:  Accounts  are  not  closed  unless  there  is  some  reason  for  it,  and  this  is  because 
they  show  a  part  of  the  profit  or  loss,  or  so  that  the  balance  may  be  brought  down  and  thus  avoid 
carrying  the  totals  indefinitely. 

TWENTIETH:  After  the  ledger  is  closed,  the  amount  credited  to  the  investor  equals  the  value 
of  all  other  accounts  on  the  ledger,  that  is,  the  difference  between  the  resources  and  liabilities. 

EXERCISES  IN  JOURNALIZING. 

The  student  will  journalize  the  transactions  in  the  following  exercises,  and  present  the  work  to 
the  teacher  for  approval.  These  are  to  be  worked  out  on  journal  paper,  that  is,  paper  with  the  same 
ruling  as  the  journal.  After  the  journal  has  been  approved,  post  the  transactions  to  ledger  sheets, 
allowing  one-fourth  of  a  page  to  each  account,  except  Merchandise,  and  Cash,  which  should  have 
one-half  page  each.  Take  a  Trial  Balance,  make  the  Financial,  and  Profit  and  Loss  statements,  and 
close  the  ledger.  References  to  the  information  concerning  Trial  Balance,  statements,  and  ledger 
closing  for  January,  will  assist  the  student  in  doing  this  work.  When  the  exercise  is  completed,  leave 
it  with  the  teacher  for  examination  and  approval. 

EXERCISE  No.  24.  February  ist,  W.  H.  Patterson  invested  $1,000.00  in  cash  in  the  retail 
grocery  business  (§  34,  ^  5  ) ;  2d,  bought  from  Borches  &  Co.,  on  account,  merchandise  per  invoice  of 
this  date,  $187.65  (§  42);  3d,  sold  J.  C.  Mason,  on  account,  5  brls.  flour,  at  $5.50;  50  lbs.  lard  at  13 
cents  (§43),  4th,  bought  from  Davis  Bros.,  for  cash,  merchandise  per  invoice  of  the  3d,  $281.36 
(§  41);  5th,  paid  cash  for  'phone  rent,  $10.00  (§  46);  6th,  bought  of  J.  Allen  Smith  &  Co.,  on  account, 


68 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


merchandise  per  invoice  of  this  date,  $221.97  (§42);  8th,  paid  Borches  &  Co.,  on  account,  $100.00 
(§  44) ;  9th,  sold  Walter  Love,  on  account,  100  bu.  corn  at  65  cents;  200  lbs.  lard  at  13  cents  (§  43); 
loth,  bought  from  Kaiser  Bros.,  on  account,  merchandise  per  invoice  of  this  date,  $111.85  (§42); 
nth,  sold  Central  Hotel,  20  brls.  flour  at  $5.50;  5  dozen  canned  tomatoes  at  $1.50  (§  43);  12th,  paid 
Borches  &  Co.,  $87.65,  in  full  of  account  (§  44) ;  13th,  sold  J.  C.  Miller,  on  account,  500  lbs.  meat  at 
II  cents;  200  lbs.  lard  at  13  cents;  6  brls.  flour  at  $5.50  (§  43);  15th,  received  cash,  for  sundry  sales, 
$106.95  (§41)1  i6th,  received  $20.00  from  Walter  Love,  on  account  (§  45) ,  17th,  paid  clerk's  salary 
for  first  half  of  the  month,  $25.00  (§  46) ;  i8th,  bought  from  Donaldson  Bros.,  on  account,  merchandise 
per  invoice  of  this  date,  $221.85  (§  4^);  19th,  sold  Central  Livery  Co.,  on  account,  100  bales,  9,648 
lbs.  hay  at  $18.50  per  ton  (see  note);  100  bu.  corn  at  65  cents  (§43);  20th,  paid  J.  Allen 
Smith  &  Co.,  $150.00,  on  account  (§44);  22d,  received  from  Walter  Love,  60  bu.  potatoes 
at  60  cents,  which  is  to  be  credited  to  his  account  (§45);  23d,  paid  Kaiser  Bros.,  in  full 
for  invoice  purchased  on  the  loth  (§44);  24th,  bought  from  the  Union  Milling  Co.,  for 
cash,  merchandise  per  invoice  of  this  date,  $186.98  (§41);  25th,  received,  for  sundry  cash 
sales,  $125.25  (§41);  26th,  sold  Robert  Love,  on  account,  100  bu.  corn,  at  65  cents;  5  brls. 
flour  at  $5.50;  10  bu.  meal  at  90  cents  (§  43);  27th,  paid  rent,  $40.00,  and  clerk  hire,  $25.00  (§  46). 
Cash  balance  $234.36.     Inventory,  value  of  goods  on  hand  $720.62. 

NOTE — When  the  price  is  per  ton  and  the  quantity  expressed  in  pounds,  multiply  the  given  number  of  pounds  by 
the  price.  The  result  divided  by  two  is  the  value  in  dollars  and  cents.  If  the  price  is  expressed  in  dollars  and  cents,  point 
off  five  places;  if  in  dollars,  only  three  places. 

REVIEW  QUESTIONS. 

The  following  questions  are  based  on  the  facts  set  forth  in  (§  92,)  and  arranged  in  the  same 
order  as  the  paragraphs  in  that  section: 


6. 


9- 
10. 

II. 


How  does  the  bookkeeper  know  that  a 
transaction  has  been  made? 

What  books  are  used  to  record  the  trans- 
actions as  they  occur? 

What  is  the  name  of  the  book  of  original 
entry  used  in  January? 

Name  the  four  steps  necessary  to  record  a 
transaction  in  the  journal. 

Describe  the  position  of  the  debit  amounts, 
accounts  debited,  credit  amounts  and 
accounts  credited. 

Why  is  it  necessary  to  write  an  explana- 
tion of  the  transaction? 

What  is  posting? 

Why  is  the  posting  checked? 

What  does  a  Trial  Balance  prove? 

What  is  the  list  of  goods  on  hand  at  the 
end  of  the  fiscal  period  called? 

At  what  price  are  goods  in  stock  inven- 
toried? 


12.  What  does  the  Financial  statement  con- 

tain? 

13.  Of  what  do    the    resources    consist,    and 

which  is  the  most  available?     Of  what 
do  the  liabilities  consist? 

14.  What  does  the  Profit  and  Loss  statement 

show? 

15.  How  does  the  bookkeeper  prove  the  cor- 

rectness   of    the    Profit    and    Loss,  and 
Financial  statements? 

16.  When  is  the  ledger  closed,  and  why? 

17.  What  is  the  object  of  the  Profit  and  Loss 

account? 

18.  What  does  the  Investment  account  show 

after  it  has  been  closed? 

19.  When  are  accounts  closed? 

20.  What  accounts  on   the  ledger  equal   the 

value  of  the  Investment  account  after 
it  is  closed? 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


69 


FEBRUARY.  • 

Introducing  Commercial  Paper,  transactions  with  the  bank,  the  cash  book  and  sales  book,  accounts 
with  furniture  and  fixtures,  notes  receivable  and  notes  payable. 

§  93.  Commercial  Paper  is  that  class  of  written  contracts  or  obligations  which  are  used  in 
the  place  of  and  for  money.    Those  most  used  are  drafts,  notes  and  checks. 

§  94.  A  Draft  is  a  Written  Order  from  one  person  to  another,  asking  him  to  pay  a  certain  sum 
of  money  to  a  third  party.  A  draft  has  three  original  parties:  the  drawer,  the  drawee  and  the  payee. 
The  one  signing  the  draft  is  the  drawer;  the  one  who  is  asked  to  pay  the  amount  is  the  drawee;  and  the 
one  to  whom  the  money  is  to  be  paid  is  the  payee.  The  draft  indicates  that  the  drawee  is  indebted 
to  the  drawer,  and  that  he  (the  drawer)  wishes  the  amount  paid  to  the  payee.  There  are  two  kinds 
of  drafts,  known  as  sight  drafts  and  time  drafts. 


I 

s 

i 


^J/  A./^^/y 


J$aiT  Ctittonio,(rcxa^i^.^^^^^l9l 


\ 


%        ^^yy/y 


illustration  No.  23.    Sight  Draft. 

§  95.  A  Sight  Draft  indicates  that  the  amount  owed  the  drawer  is  due  or  past  due,  and  he 
wishes  it  paid  at  once.  Unless  days  of  grace  are  allowed,  a  sight  draft  must  either  be  paid  when  pre- 
sented or  returned  to  the  payee  at  once.    See  illustration  No.  23. 


u 

i 

n 

% 

t 


W5 


fh^(tr>^r4f_^ 


^ 


fyf^^/'/^/?7yyf:&jyiy  y^.A^  ^t^\lH 


'  yl^J/,/7??y7j^  r/ry7yr?J>y 


[m  77 Amxm- 


M.^<i\\nx» 


?S fy-/0 


Illustration  No.  24.    Time  Draft — ^Acceptance. 


70  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

§  96.  A  Time  Draft  indicates  that* the  amount  owed  the  drawer  is  not  due,  or  that  he  wishes 
to  allow  the  drawee  additional  time  to  make  payment.  They  are  usually  drawn  a  certain  number 
of  days  after  sight,  or  after  date,  and  must  be  accepted  or  returned  as  soon  as  presented.  Time  drafts 
are  accepted  by  writing,  in  red  ink,  "Accepted,"  the  date  and  name  of  the  drawee  across  the  face.  The 
name  of  the  bank  at  which  the  draft  is  made  payable  may  be  indicated  if  desired.  See  illustration 
No.  24. 

^  I.  An  Accepted  Time  Draft  is  sometimes  called  an  "Acceptance."  A.  H.  Miller's  acceptance  means 
a  time  draft  drawn  on  A.  H.  Miller  and  accepted  by  him. 

^  2.  No  Protest.  The  law  requires  that  each  person  liable  for  the  payment  of  a  draft  or  other 
commercial  paper,  must  be  notified  in  case  of  nonpayment.  The  holder  can  waive  this  by  using  the 
"No  Protest"  notice  shown  on  the  left-hand  end  of  illustrations  Nos.  23  and  24. 

§  97.  Original  Use  of  Drafts.  Drafts  were  originally  used  to  avoid  sending  money  to  a  dis- 
tant place.  A,  in  Chicago,  owes  B,  in  Louisville,  a  debt  of  $500;  C,  of  Louisville,  owes  A,  of  Chicago, 
an  equal  amount.  A  writes  an  order  (draft)  on  C,  asking  him  to  pay  the  amount  to  B,  and  sends  the 
draft  to  B.  B  presents  this  to  C,  who  pays  it,  retaining  the  draft  as  his  receipt.  With  the  numerous 
means  now  in  use  for  transporting  money  with  absolute  safety,  this  use  of  drafts  is  about  out  of  practice. 

§  98.  Present  Use  of  Drafts.  Drafts  are  now  used  as  a  collecting  medium  only,  in  nearly 
all  cases  some  bank  or  collection  agency  being  the  payee.  In  the  above  example,  A  would  send  his 
check  to  B,  and  expect  C  to  pay  his  account  in  the  same  way.  In  case  C  did  not  do  this,  he  (B) 
would  draw  a  draft  on  him  (C),  in  favor  of  some  bank,  either  in  Chicago  or  Louisville,  and  send  it  to 
the  bank  to  collect.  If  A  does  not  send  his  check,  B  would  draw  a  draft  on  him  in  favor  of  some  bank 
and  send  it  to  the  bank  for  collection.    See  illustrations  Nos.  23  and  24. 


(^^^/y-./yj/rr^^ ^ 4^^ypSzM 


Illustration  No.  25.     Promissory  Note. 

§  99.  A  Note  is  a  Written  Promise  to  Pay  a  fixed  amount  at  a  stated  time,  and  signed  by  the 
person  agreeing  to  pay  it.  A  note  has  two  original  parties,  the  maker  and  the  payee.  The  one  who 
signs  the  note  is  the  maker;  the  one  in  whose  favor  it  is  made,  the  payee.  A  note  indicates  that  the 
maker  is  indebted  to  the  payee,  and  has  agreed  to  pay  the  amount  stated,  at  the  maturity  of  the  note. 

Notes  are  used  in  business  as  evidence  of  indebtedness,  either  as  a  loan  or  as  an  extension  of  time 
on  some  debt.  Thus  A,  a  merchant,  sells  B  a  quantity  of  goods  to  be  paid  for  on  the  first  of  the  fol- 
lowing month.  At  this  time  B  states  he  is  not  in  a  position  to  meet  the  obligation,  but  will  give  his 
note  due  in  thirty  days  in  payment  of  the  amount.  Should  B  have  a  good  credit,  A  can  transfer  the 
note  to  his  banker,  receiving  the  cash,  less  interest  to  maturity.  Thus  B  gets  the  desired  time,  A 
gets  his  money,  and  the  bank  gets  the  interest.     See  illustration  No.  25. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


71 


^  I.  A  Time  Draft,  after  it  is  accepted,  is  the  same  as  a  note  because  the  person  who  accepts  it 
agrees  to  pay  the  amount  mentioned  at  a  fixed  time.     See  §  96,  ^  i. 

§  100.  Gommercial  Papers  Regarded  as  Cash.  As  explained  in  §  27,  cash  is  money  or 
commercial  paper  that  the  bank  will  accept  as  money.  Commercial  papers  of  this  class  consist  of 
personal  checks,  bank  drafts,  cashier's  checks,  express  money  orders,  bank  money  orders,  postal 
money  orders,  traveler's  checks,  etc.  The  most  popular  forms  are  illustrated  in  Nos.  26,  27,  28, 
and  29,  and  explained  in  ^^  i — 6  following. 


rX/JTtr  c^^y?iu^jy:^  (^^/yyOc^jy-yrT^j^y  y(7y?^^y ■ — M  ^xMaiA 


"4^0 


^1 


}§0\xihmM^Ufiph0!^phMfni\\\zu^0 


> 


/ 


^^j:^A^^y??7J?Af7^y-^ 


^ityi.ittft^M 


Illustration  No.  26,     Specially  arranged  Personal  Check. 

^  I.  Personal  Checks  are  Explained  in  §104.  The  form  of  check  used  may  be  that  supplied  by 
the  bank  or  any  special  form  desired  by  the  depositor.  Many  firms  have  very  elaborate  checks  con- 
taining information  concerning  their  business.  Some  of  them  are  prepared  with  special  space  for 
information  concerning  the  amount  paid.  These  are  known  as  "Voucher  Checks."  Illustrations 
Nos.  26  and  31  show  two  forms  of  personal  checks. 


><5^:====?^ 


9//^r//y ,  /Vpy.      fUy?7yyy7^/^yy  /J. .  Aer^A^^LZ 
(f   yJy/ry^/y-^j/-rr  ^y?7yf^y- 

f 


-nk^c/df'?^ 


Qy  ^y  A/JAA/?yyy Cashier. 


Illustration  No.  27.     Bank  Draft. — "New  York  Exchange." 


72 


20TH-  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^  2,  Bank  Draft.  A  bank  draft  is  a  check  drawn  by  one  bank  on  another,  and  is  evidence  that 
the  bank  drawing  the  draft  has  money  on  deposit  with  the  bank  on  which  it  is  drawn.  This  is  some- 
times called  "Exchange,"  especially  if  drawn  on  a  bank  in  New  York,  Chicago,  St.  Louis,  or  some 
other  large  city.     Illustration  No.  27  shows  the  form  of  a  bank  draft.     Read  §  212. 


^ 

O 


C/5 


j\&.rr^f¥/ 


t^^/'m^^fM,^e^^zM< 


'-i^A^ 


/^{^fJZ. 


■'/PC 


-Ty/^a 


r^y^-7Q 


^  c^  '^hjrrr/.yyryAJ. 


Cashter 


Illustration  No.  28.    Cashier's  Check. 

^  3.  Cashier's  Check.  A  cashier's  check  is  one  drawn  on  the  bank  and  signed  by  the  cashier. 
These  are  used  in  payment  of  collections  made  for  persons  who  are  not  customers  or  for  paying  obli- 
gations of  the  bank.     Illustration  No.  28  shows  the  form  of  a  cashier's  check. 


I 


When  Countersigned      * 

BY  AGENT  AT  POI  NT  OF  ISSUE 


EXPRESS  MONEY  ORDER 


II-  5684625 


AGREES  TO  TRANSMIT  AND 

Pay  TO  the  order  of     cJ^J^y^^rT^Wy  ^  / 


9??y 


v^r 


so 


\    The  Sum  OF     ^^^.^^-,^.:^Z^^^^^^^;^^- 


TooDOLLARS 


Agent 
3  Issued  AT 

7/AnYyui/^yiy     state  of  v^^AA^ 
g  oatf     G^,y?z/^^^.^y?^y  f.  1912. 


Jypyt7Jy^^O^///7.y/Ar/r?y. 


Illustration  No.  29.     Express  Money  Order. 

\  4.  Express  Money  Orders.  An  express  money  order  is  a  check  issued  by  an  express  company. 
These  are  sold  to  persons  who  wish  to  send  money  to  some  person  in  another  city.  The  leading  ex- 
press companies  in  the  United  States  are  the  Adams,  American,  Wells  Fargo,  United  States,  and 
Southern.    Illustration  No.  29  shows  an  express  money  order  issued  by  the  American  Express  Company. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  73 

^  5.  BanJz  Money  Orders.  A  bank  money  order  is  used  for  the  same  purpose  as  the  express 
money  order,  and  is  issued  by  the  Bankers'  Association,  in  competition  with  the  express  companies. 
They  are  sold  to  those  who  wish  to  send  money  to  some  person  at  a  distance.  The  draft  is  drawn 
on  a  central  bank  in  New  York  City,  by  a  bank,  which  is  a  member  of  the  association,  and  payment 
i^  guaranteed  by  a  trust  fund. 

\  6.  Postal  Money  Orders.  These  are  issued  by  the  United  States  postoffice,  and  are  sold 
to  persons  who  wish  to  send  money  to  some  person  at  a  distance.  A  special  form  of  application  for 
money  order  is  provided,  and  this  must  be  filled  out  by  the  sender.  The  money  order  is  then  issued 
on  the  postmaster  where  the  person  to  whom  the  money  is  sent  gets  his  mail.  When  he  receives 
his  money  order,  he  can  present  it  to  the  postmaster  and,  when  properly  identified,  receive  the  amount 
specified  in  the  order. 

§  101.  A  Bank  is  a  Business  organized  for  the  purpose  of  dealing  in  cash  and  securities.  The 
capital  invested,  together  with  the  money  deposited  by  depositors,  is  loaned  to  those  engaged  in  other 
business  enterprises.  A  bank  is  absolutely  essential  in  every  business  community,  and  offers  many 
advantages,  some  of  which  are  as  follows:  a  safe  place  for  the  keeping  of  money  without  cost  to  the 
owner;  a  means  of  paying  obligations  without  handling  money;  a  place  where  money  can  be  borrowed, 
either  on  the  note  of  the  borrower  or  one  owned  by  him;  a  means  of  collecting  drafts  or  other  evidence 
of  indebtedness. 

Money  deposited  in  a  bank  may  be  withdrawn  at  any  time,  except  under  certain  conditions, 
which  are  agreed  to  by  the  depositor.  Money  is  withdrawn  by  means  of  a  check,  which  may  be  made 
payable  to  the  depositor  or  the  order  of  some  one  designated  by  him.  As  the  greater  part  of  bank 
bookkeeping  is  keeping  accounts  with  those  who  deposit  money  and  withdraw  it,  it  is  necessary  to 
provide  the  depositors  with  correct  forms  in  order  to  facilitate  the  work.  The  two  principal  forms 
supplied  by  the  bank  are  blank  deposit  tickets  and  checks. 

§  102.  A  Deposit  Ticket,  or  slip,  as  it  is  sometimes  designated,  is  a  printed  form  supplied 
by  the  bank  to  its  depositors,  on  which  the  currency  and  checks  deposited  are  listed.  Unless  the  bank 
provided  special  forms,  depositors  would  be  disposed  to  use  any  kind  of  paper  that  might  be  avail- 
able. The  deposit  tickets  supplied  by  the  bank  are  arranged  in  correct  form,  and  in  many  cases  pro- 
vide a  carbon  copy  to  be  retained  by  the  depositor.  Illustration  No.  30  shows  two  deposit  tickets, 
one  with  currency  only,  and  one  with  checks  and  currency. 

§  103.  Instructions  for  Making  a  Deposit.  The  bank  teller  has  many  deposits  to  enter  each 
day,  and  they  should  be  arranged  to  facilitate  his  work.  If  the  following  instructions  are  observed, 
the  teller  can  readily  audit  the  deposit: 

^  I.  Small  Change  is  put  up  in  Envelopes  provided  by  the  bank.  These  are  usually  arranged 
to  contain  twenty-five  pennies,  twenty  nickels,  twenty  dimes,  twenty  quarters,  and  twenty  halves. 
Coin  wrappers  may  be  used  in  place  of  the  envelopes.  If  not  supplied  by  the  bank,  they  can  be  pur- 
chased at  any  stationery  store,  and  are  made  to  contain  an  even  number  of  dollars.  The  name  of 
the  depositor  must  be  stamped  or  written  on  each  package. 

^  2.     Paper  Money  is  Arranged  in  Regular  Order,  the  smaller  denominations  on  top. 

^  3.  Checks  are  Arranged  in  the  Same  Order  as  they  are  Listed;  the  name  of  local  banks  and  the 
address  of  out-of-town  banks  should  be  written  at  the  left,  and  on  the  same  line  with  the  amount  of 
the  check. 

^  4.  Each  Check  must  be  Endorsed.  The  correct  endorsement  is,  "Pay  to  the  order  of,"  the  name 
of  the  bank,  for  deposit,  the  name  of  the  firm,  and  the  name  of  the  person  who  made  up  the  deposit. 
Thus,  if  the  checks  are  deposited  in  the  Merchants  National  Bank  by  W.  H.  Goodwin,  and  L.  A. 
Owen  made  up  the  deposit,  the  endorsement  is,  "Pay  to  the  order  of  Merchants  National  Bank 
for  deposit,  W.  H.  Goodwin,  by  L.  A.  Owen."  Endorsements  are  written  on  the  left  hand  end  of  the 
check,  and  on  the  back.  Hold  the  check  so  that  it  can  be  read,  turn  it  over  by  bringing  the  top  towards 
you,  and  write  the  endorsement  across  the  back,  about  one  inch  from  the  left-hand  end.     (§108.) 

^  5.     The  Deposit  Ticket  is  Added,  and  the  total  entered  at  the  bottom,  on  the  line  with  "Total" 


74 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


printed  on  the  ticket.    If  an  adding  machine  is  used  in  the  office,  and  practically  all  up-to-date  offices 
use  them,  the  various  amounts  on  the  deposit  ticket  are  added  on  the  machine  to  insure  correctness. 


ALWAYS  BRING  YOUR  PASS  BOOK. 

Merchants  National  Bank 


ALWAYS  BRING  YOUR  PASS  BOOK. 


Merchants  National  Bank 


^T- 


y^J-.    /-    '■  J.9J 


LIST  EACH  CHECK  SINGLY. 

Doll's. 

Cts. 

^iimmr/U^ 

/soc 

^J^^ 

'^A'^Ja^ 

^^^/y 

/soo 

LIST  EACH  CHECK  SINGLY. 

Doll's. 

Cts. 

^Siirrenr^ 

/j?.r 

00 

S^y^^ 

/J 

so 

'/^yJa/  Jhy^y/  '^^^ym^J^ 

/jj. 

^s 

<<■       ^^^.y>Ki.*^iyr 

//r 

(^0 

r^ 

^s 

*'       '^^y9yiAyp/?7^9^y7^. 

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Illustration  No.  30.    Deposit  Tickets,  Feb.  i,  and  13. 

§  104.  A  Check  is  a  Written  Order  by  a  Depositor  to  his  banker,  designating  to  whom  he 
wishes  the  banker  to  pay  a  part  or  all  the  money  he  has  on  deposit.  No  particular  form  is  necessary, 
but  it  is  best  to  use  the  special  form  prepared  by  the  bank.  These  forms  are  designed  so  that  the  follow- 
ing facts  may  be  set  forth:  The  date,  which  is  the  month,  day  of  the  month  and  year;  the  number 
of  the  check;  the  name  of  the  bank  or  banking  firm  on  which  it  is  drawn;  the  name  of  the  person  to 
whom  the  money  is  to  be  paid;  the  amount,  which  is  written  in  figures  in  one  location,  and  in  writing 
in  another;  the  signature,  which  is  the  name  of  the  depositor,  or  his  name  and  the  name  of  the  person 
authorized  to  sign  it.  Checks  are  usually  bound  in  book  form,  each  being  provided  with  a  stub,  so 
that  ^  permanent  record  may  be  kept  of  all  the  facts  mentioned  in  the  check, 

§  105.  Instructions  for  Writing  a  Check.  The  stub  is  the  record  of  the  check,  and  should 
be  filled  out  first.  While  it  is  not  necessary  to  do  this,  yet  if  omitted  until  after  the  check  is  written, 
it  is  likely  to  be  forgotten.  In  filling  out  the  check,  there  are  five  important  points,  as  follows:  The 
date;  the  person  to  whom  it  is  issued;  the  amount  in  figures;  the  amount  in  writing;  the  signature 
of  the  depositor,  which  must  be  the  same  as  that  signed  on  the  signature  book  or  card,  at  the  time 
the  account  is  opened  with  the  bank. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


75 


Tf  I.  The  Date  should  be  the  Same  as  that  on  which  the  check  is  written,  though  sometimes 
it  is  dated  with  a  future  date,  in  which  case  it  is  not  payable  until  the  date  mentioned. 

^  2.  The  Name  of  the  Person  to  whom  the  check  is  to  be  paid,  is  preceded  by  the  words,  "Pay 
to  the  order  of."  This  means  that  if  he  does  not  want  to  go  to  the  bank  and  get  the  money,  he  can 
designate,  by  endorsement,  to  whom  he  does  want  it  paid.  If  endorsed  properly,  the  check  may  be 
transferred  an  indefinite  number  of  times.  It  is  the  best  policy  to  deposit  all  checks  received  at  once, 
as  the  depositor  might  withdraw  his  money.  It  is  also  the  best  policy  to  pay  obligations  by  giving 
your  own  check,  and  not  by  transferring  checks  of  others. 

^  3.  The  Amount  should  be  Written  in  figures  and  in  words,  each  in  a  difi^erent  location.  The 
figures  and  words  should  be  arranged  so  that  it  is  not  possible  to  increase  the  amount  by  inserting 
other  figures,  or  words.  It  is  good  policy  to  stamp  the  amount  on  the  check.  Special  machines  are 
prepared  for  this  purpose.     If  the  words  and  figures  are  different,  the  writing  governs  the  amount. 

^  4.  The  Signature  must  be  the  Same  as  that  signed  on  the  signature  book  or  card.  If  the  check 
is  signed  by  any  other  person  except  the  depositor,  this  person  must  sign  the  depositor's  name  and 
write  his  name  underneath,  to  indicate  that  he  has  authority  to  sign  the  check. 


Favor.. 

For  J!»:?^//^^C<^«^ 

Am^nl,  JfZ?^ 

Bal.  Carried  Forward 


oA?A_ 


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Merchants  National  Bank 


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Merchants  National  Bank 


^t^^^^w.^^^..^^ 


Illustration  No.  31.     First  Page  of  Check  Book. 

§  106.  Opening  an  Account  with  the  Bank.  If  a  person  has  money  and  wishes  to  deposit 
it  in  a  bank,  it  seems  that  he  should  have  no  trouble  in  doing  this,  as  there  are  a  number  of  banks 
in  every  community.  However,,  banks  are  usually  very  careful  about  opening  accounts  with  individ- 
uals or  firms,  and,  as  a  general  rule,  require  someone  with  whom  the  cashier  or  some  other  official 
is  acquainted,  to  introduce  the  new  depositor.  When  a  depositor  makes  his  first  deposit,  he  is  required 
to  sign  the  signature  book  or  card,  giving  his  name  just  as  he  expects  to  sign  all  checks.  This  is  neces- 
sary so  that  the  paying  teller  may  know  that  the  checks  signed  with  the  depositor's  name  are  not 
forgeries. 

§  107.  Method  of  Keeping  a  Record  of  Transactions  with  the  Bank.  Transactions  with 
the  bank  are  represented  by  cash  deposited,  notes  discounted  and  checks  written.  While  the  bank 
keeps  a  careful  record  of  all  the  transactions  with  the  depositors,  yet  each  depositor  should  keep  just 
as  careful  a  record.    A  special  book  may  be  kept  with  the  bank  in  which  all  deposits  and  checks  are 


76 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


entered.  However,  the  best  results  are  obtained  by  keeping  the  account  on  the  check  stub.  As  a 
general  rule,  the  check  book  contains  two  or  more  checks  to  the  page,  each  being  provided  with  a  stub. 
This  stub  is  ruled  with  a  money  column  at  the  right.  The  first  deposit  is  entered  at  the  top  of  the  first 
stub,  and  in  this  column.  When  the  first  check  is  written,  the  amount  is  extended  into  the  money 
column,  and  subtracted  from  the  deposit.  Each  succeeding  check  is  subtracted  in  the  same  manner, 
and  each  deposit  added  at  the  time  it  is  made.  Unless  the  depositor  retains  a  carbon  copy  of  the  cur- 
rency and  checks  deposited,  they  should  be  listed  on  the  back  of  a  stub  which  has  been 
used.  It  is  necessary  to  keep  a  copy  of  each  deposit  so  that  the  auditor  may  know  the  amount  of 
cash  deposited  in  the  bank.     See  illustration  No.  30. 

A  complete  record  of  the  transactions  with  the  bank  may  be  kept  on  the  back  of  the  stub,  instead 
of  being  recorded  in  the  special  ruled  column  on  the  front.    This  method  will  be  explained  later. 

§  107a.  Reconciliation  of  the  Bank  Account.  At  least  once  each  month  the  pass  book  should 
be  left  at  the  bank  to  be  balanced.  When  returned  it  will  show  the  amount  of  each  check  paid  by  the 
bank  and  the  depositor's  balance  in  the  bank.  The  canceled  checks  will  be  returned  with  the  pass 
book.  The  bookkeeper  should  check  these  with  the  check  stubs  to  see  that  no  change  has  been  made  in 
the  amount  of  any  check.  If  all  checks  written  have  not  been  paid,  the  balance  in  the  bank,  as  shown 
by  the  check  stub,  will  be  the  same  as  the  balance  in  the  pass  book,  less  the  total  of  the  unpaid  checks. 
If  all  checks  written  have  been  paid,  the  two  balances  will  be  the  same.  The  bookkeeper  must  prove  his 
balance  each  time  the  pass  book  is  written  up. 

§  108.  Endorsements.  An  endorsement  is  any  writing  placed  on  the  back  of  a  check,  note, 
or  other  business  paper,  with  the  intention  of  transferring  the  title,  receipting  for  payment,  or  for 
the  accommodation  of  some  of  the  parties  on  the  paper.  The  endorsement  is  written  on  the  back 
and  across  the  left-hand  end  of  the  paper,  about  one  inch  from  the  end.    See  illustration  No.  32. 


Illustration  No.  32.     Showing  Position  of  Endorsement. 

§  109.  Endorsement  for  Transfer.  There  are  a  number  of  ways  of  writing  the  name  of  the 
holder  of  a  commercial  paper  in  order  to  transfer  the  title,  all  of  which  will  be  explained  in  the  study  of 
Commercial  Law.  We  shall  explain  here  the  four  most  used  by  the  bookkeeper:  "in  blank," 
full,"  "for  deposit,"  and  "for  collection." 


m 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


77 


Z/tiu  to  i/ie  o/^iier^  o/ 


,^or-  couecuon 


UttH 


^  I.  "/w  Blank."  An  endorsement  in  blank  is  the  name  of  the  payee 
or  holder  only,  written  across  the  back.  It  has  the  same  effect  as  making 
the  paper  payable  to  bearer,  and  may  be  transferred  by  any  subsequent 
holder,  without  further  endorsement;  this  is  generally  required. 

^2.  "/m  Fully  This  endorsement  is  effected  by  writing  "Pay  to 
the  order  of"  above  the  name  of  the  person  or  firm  to  whom  it  is  transferred, 
then  signing  the  name  of  the  payee  or  holder.  The  person  to  whom  it  is 
transferred  must  endorse  it  before  any  succeeding  holder  can  use  it.  All 
papers  sent  through  the  mail,  or  to  be  held  for  some  time  by  the  person 
who  receives  them,  should  be  endorsed  in  full. 

^3.  "i^or  Deposit.''  Checks  or  other  commercial  paper  deposited 
at  a  bank  should  have  "For  Deposit"  written  above  the  name  of  the  per- 
son depositing;  in  case  they  are  lost,  they  are  worthless  to  any  one  except 
the  depositor.  Many  firms  use  a  rubber  stamp  for  endorsing  checks  and 
other  cash  items  for  deposit.  This  is  more  convenient  when  making  a 
deposit  as  it  saves  much  time  in  endorsing  the  papers.  When  so  endorsed, 
papers  can  only  be  used  as  a  deposit  in  the  bank. 

^  4.  ''For  Collection."  Notes  left  at  a  bank  or  other  collection  agency 
for  collection,  should  have  "For  Collection"  written  above  the  endorse- 
ment. "Pay  to  the  order  of"  and  the  name  of  the  bank  or  Collection 
agency  is  written  above  this  endorsement.  This  prevents  the  paper  being 
used  as  property  of  the  bank,  or  collection  agency. 

§  110.  Endorsement  for  Receipt  of  Part  Payment.  When  only  part  payment  is  made  on 
commercial  paper,  the  receipt  for  the  same  should  be  written  on  the  back  of  the  paper,  and  by  the 
holder.  The  date  and  amount  is  all  that  is  necessary,  and  under  no  circumstances  should  the  holder 
write  his  name. 

§  111.  Endorsement  for  Accommodation.  This  is  effected  by  any  one  signing  his  name  on 
the  back  of  a  commercial  paper  for  the  purpose  of  guarantying  the  payment.  This  class  of  endorsers 
is  as  responsible  for  the  payment  of  the  paper  as  if  they  had  transferred  it. 

The  endorsing  of  any  commercial  paper  should  be  well  understood,  as  it  always  transfers  the  title 
and  holds  the  endorser,  in  case  default  is  made  in  payment.    The  law  allows  the  same  protection  to 
this  class  of  paper  as  it  does  to  money,  and  unless  it  is  properly  endorsed,  if  lost,  the  finder  may  dis 
pose  of  it,  in  which  case  the  one  who  lost  it  can  not  recover  it. 

§  112.  Signing  Commercial  Papers.  All  commercial  papers  should  be  signed  by  the  party 
or  parties  responsible  for  payment,  or  by  a  lawful  agent.  An  agent  authorized  to  sign  commercial 
papers,  should  have  a  Power  of  Attorney  as  evidence  of  his  authority.  In  the  case  of  a  partnership 
either  partner  has  the  authority  to  sign  contracts,  and  can  bind  the  firm  by  his  action.  In  the  case  of 
a  corporation,  the  signature  must  be  made  by  a  legally  authorized  official;  and  those  accepting  a  com- 
mercial paper  signed  by  a  corporation,  must  know  that  the  person  who  signed  the  contract  has  authority 
to  do  so.  When  commercial  paper  is  signed  by  a  partnership  or  corporation,  the  firm  name  must 
appear  first,  and  under  this  the  name  of  the  partner,  or  person,  who  is  authorized  to  sign.  No  one 
should  sign  commercial  papers  for  another  without  writing  his  own  name,  preceded  by  the  word  "By," 
or  "Per"  underneath  the  name  signed,  and  he  should  not  do  this  unless  he  has  the  proper  authority 
to  sign  the  paper.  If  he  signs  the  name  of  another,  whether  it  is  an  individual,  partnership  or  cor- 
poration, and  does  not  write  his  name,  he  might  be  held  for  forgery,  in  case  the  principal  should  deny 
his  authority.  If  he  signs  his  name  underneath  that  of  the  principal  without  using  the  words  "By" 
or  "Per,"  he  may  then  be  held  jointly  with  the  principal  or  maker. 


78 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


QUESTIONS. 


1.  Define  a  commercial  paper.     (§  93.)  25. 

2.  What  is  a  draft?     (§  94.) 

3.  What  is  a  sight  draft?     (§  95.)  26. 

4.  What  is  a  time  draft?    (§  96.)  An  accept-  27. 

ance?  (§  96,  ^  i.) 

5.  What   was   the   original   use   of   a   draft?  28. 

(§  97-) 

6.  What  is  the  present  use  of  a  draft?    (§  98.)  29. 

7.  What  is  a  note?     (§  99.) 

8.  For  what  are  notes  used?     (§  99-) 

9.  Why  is  a  time  draft  that  has  been  accepted  30. 

regarded  the  same  as  a  note?     (§  99.) 

10.  Name  the  kinds  of  commercial  paper  re-  31. 

garded  as  cash.     (§  100.) 

11.  What  is  a  personal  check?     (§  100,  ^  l.)  32. 

12.  What  is  a  bank  draft?     (§  100,  ^  2.)  33. 

13.  What  is  a  cashier's  check?     (§  100,  ^  3.) 

14.  What  is  an  express  money  order?     (§  100,  34. 

15.  What  is  a  bank  money  order?    (§100,^5.)  35. 

16.  What  is  a  postal  money  order?      (§  100, 

H  6.)  36. 

17.  What  is  a  bank?    (§  loi.)  37. 

18.  Can   money  deposited  in  a  bank  be  with- 

drawn at  any  time?     (§  loi.)  38. 

19.  What  is  a  deposit  ticket?     (§  102.) 

20.  Describe  the  method  of  making  a  deposit. 

(§  103.)  39- 

21.  What  is  meant  by  change?     (§  103,    ^  i.) 

22.  What  is  meant  by  paper  money?     (§  103,  40. 

23.  What  is  meant  by  checks?     (§  103,  ^3.)  41. 

24.  Why  and  how  must  each  check  be  en- 

dorsed?    (§  103,  Tl  4.)  42. 


What  does  the  total  of  the  deposit  ticket 

show?      (§   103,  ^5.) 
What  is  a  check?     (§  104.) 
Describe  the  method  of  writing  a  check. 

(§  105.) 
What  does  the  date  of  the  check  show? 

(§  105,  H  I.) 

Is  it  necessary  to  write  the  name  of  the 
person  to  whom  the  check  is  payable? 
(§  105,  II  2.) 

Why  is  the  amount  indicated  in  figures 
and  writing?     (§  105,  If  3.) 

If  the  two  amounts  do  not  agree,  which 
is  considered?     (§  105,  T[  3.) 

How  must  a  check  be  signed?    (§  105,  ^  4.) 

What  is  the  usual  method  of  opening  an 
account  with   the   bank?      (§  106.) 

Why  do  you  suppose  banks  wish  a  new 
customer  to  be  well  recommended? 

Describe  the  method  of  keeping  an  ac- 
count with  the  bank.     (§  107.) 

Define   endorsements.      (§  108.) 

What  is  meant  by  endorsement  for  trans- 
fer?    (§  109.) 

Name  the  four  kinds  of  endorsements  for 
transfer  and  distinguish  between  each, 
(§  109,  HH  1-4.) 

When  a  part  payment  is  made  on  a  note 
how  is  the  receipt  given?     (§  no.) 

What  is  meant  by  endorsement  for  accom- 
modation?    (§  III.) 

Who  should  sign  a  commercial  paper? 
(§112.) 

How  is  a  commercial  paper  signed?  (§  112.) 


SALES  BOOK. 


§  113.  The  Object  of  the  Sales  Book  is  to  contain  a  record  of  credit  sales.  In  a  mercantile 
or  trading  business,  there  are  always  more  or  less  credit  sales.  To  record  each  of  these  in  the  journal 
means  to  write  the  name  of  the  person  to  whom  the  goods  were  sold,  the  word  "Merchandise,"  together 
with  the  two  amounts,  and  the  necessary  explanation.  If  all  the  credit  sales  are  entered  in  one  book, 
and  no  other  transactions  are  entered  in  this  book,  the  total  amount  would  equal  the  credit  sales  of 
merchandise.  There  are  three  important  steps  necessary  to  make  an  entry  in  the  sales  book:  The 
date;  the  name  of  the  person  to  whom  the  sale  was  made  and  the  amount;  and  the  explanation, 
which  must  contain  a  list  of  the  goods  sold  as  shown  on  the  bill  rendered.  It  is  necessary  to  keep  a 
record  of  all  goods  sold  on  time,  because  a  customer  will  sometimes  dispute  the  amount  with  which 
he  is  charged. 

^  I.     A  Credit  Sale  is  entered  in  the  Sales  Book  as  follows:    The  date,  which  is  written  at  the  top 


_,35S^^^^^^^^^^^,  /f/ 


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.^ 


/■<i7 


^  /.CO 


./s~ 


^^^ 


J2 


/  z' 


^  c 


Illustration  No.  33.     Sales  Book. 


7 

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8o 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Illustration  No 


Debit  side  of  Cash  Book. 


for  the  first  sale,  and  in  the  center  of  the  page  for  the  succeeding  sales;  the  name  of  the  person  to 
whom  the  sale  was  made,  and  his  address,  if  desired ;  the  amount  of  the  sale ;  a  description  of  the 
items  sold  and  the  amount  of  each.  The  name  is  written  at  the  left,  exactly  the  same  as  a  debit 
account  in  the  journal;  the  address,  if  given,  is  written  on  the  same  line,  and  just  to  the  right  of  the 
name;  the  amount,  which  is  the  total  of  the  sale,  is  entered  in  the  second  money  column,  on  the 
same  line  with  the  name;  the  description  of  the  items  sold,  which  is  a  copy  of  the  bill  rendered,  is 
entered  just  below  the  name,  beginning  one-half  inch  to  the  right.  Enter  each  item  on  a  line  to 
itself,  and  extend  the  amount  of  the  item  into  the  first  money  column.  Illustration  No.  33  shows 
the  correct  form  of  sales  book  entries. 

^  2.  Since  nothing  but  Credit  Sales  are  Entered  in  this  Book,  it  is  not  necessary  to  write  the  word 
"Merchandise"  at  the  time  each  sale  is  made,  or  to  credit  the  Merchandise  account  at  the  time  the 
customer  is  charged.  When  a  page  is  full,  it  is  footed  and  the  total  forwarded  to  the  next  page.  At 
the  end  of  the  month,  the  Merchandise  account  will  be  credited  with  the  total  amount  of  the  sales, 
which  equals  the  sum  of  the  various  debits  posted  to  customer's  accounts. 

CASH  BOOK. 


§  114.  The  Object  of  the  Cash  Book  is  to  contain  a  record  of  all  the  transactions  affecting  the 
Cash  account.  In  every  business  there  are  more  transactions  with  cash  than  any  other  account.  If 
all  of  these  are  entered  in  a  special  book  for  cash  transactions,  much  time  will  be  saved,  since  a  journal 
entry  requires  the  word  "Cash"  written  for  each  debit  or  credit.  The  cash  book  is  really  the  Cash 
account,  and  when  kept,  usually  represents  the  only  record  with  cash.  Since  cash  transactions  affect 
the  business  in  two  ways,  one  when  cash  is  received,  and  the  other  when  it  is  paid,  it  is  best  to  arrange 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


8i 


^^^^^^^'^g^^^-^^^g^o^ 


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'c:^!y?'^z*^J^<^5>ts^:2i^i^<z^i^^<^^«v&^ 


^C=r^3»-Z--'^^'*«^^^f'>«'«'^i^ 


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/ 


^' 


3      O 


^ 


.      2   3/      / 


Illustration  No.  35.     Credit  side  of  Cash  Book. 


4^£> 


the  cash  book  so  that  transactions  with  cash  received  may  be  kept  on  one  page,  and  those  when  cash 
is  paid  on  another.  These  pages  should  be  opposite  each  other,  and  the  receipts  written  on  the  left, 
because  cash  is  debited  when  money  is  received ;  and  the  payments  on  the  right,  because  cash  is  credited 
when  money  is  paid.  Illustration  No.  34  shows  the  debit  side  of  the  cash  book,  and  No.  35  the  credit 
side. 

T[  I.  Debit  side.  This  page  contains  a  record  of  all  transactions  in  which  cash  is  received.  It 
is  the  debit  side  because  cash  is  debited  when  received.  There  are  three  important  steps  necessary 
to  record  a  transaction  on  the  debit  side  of  the  cash  book:  The  date;  the  name  of  the  person  from 
whom  money  was  received,  or  the  account  credited,  and  the  amount;  the  explanation  or  informa- 
tion for  the  auditor.  These  facts  are  all  written  on  one  line,  and  in  the  order  named.  When  the  month 
and  day  of  the  month  are  the  same  in  more  than  one  transaction,  it  is  not  necessary  to  repeat  them, 
as  all  transactions  between  one  date  and  the  next  are  supposed  to  have  occurred  on  the  date  last  written. 

If  all  the  transactions  in  which  cash  is  received  are  entered  on  the  debit  side  of  the  cash  book, 
the  total  of  this  side  is  the  amount  of  cash  received.  This  amount,  plus  the  balance  on  hand  at 
the  beginning  of  the  month,  will  be  the  cash  on  hand,  if  none  has  been  paid.  See  illustration  No. 
34  for  form  of  the  debit  side  of  the  cash  book. 

T[  2.  Credit  side.  This  page  contains  a  record  of  all  the  transactions  in  which  cash  is  paid.  It 
is  the  credit  side  because  cash  is  credited  when  paid.  There  are  three  important  steps  necessary  to 
record  a  transaction  on  the  credit  side  of  the  cash  book:  The  date;  the  name  of  the  person  to  whom 
the  amount  was  paid,  or  account  debited,  and  the  amount;  the  explanation  or  information  for  the 
auditor.  This  is  all  written  on  one  line,  and  in  the  order  named.  When  the  month  and  day  of  the 
month  is  the  same  in  more  than  one  transaction,  it  is  not  necessary  to  repeat  them.  When  no  date 
is  given,  all  of  the  transactions  are  supposed  to  have  occurred  on  the  date  last  written. 


82  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

If  all  transactions  in  which  cash  is  paid  are  entered  on  the  credit  side  of  the  cash  book,  the  total 
will  represent  all  the  money  paid.  This  deducted  from  the  total  receipts,  plus  the  amount  on  hand 
at  the  beginning  of  the  month,  must  show  the  cash  on  hand.  Illustration  No.  35  shows  the  form  of 
the  credit  side  of  the  cash  book. 

^  3.  Form  of  Cash  Book.  The  student  will  note  the  position  of  illustrations  Nos.  34  and  35 
as  well  as  the  method  of  recording  the  transactions.  The  receipts  and  payments  are  opposite  each 
other,  and  all  the  lines  on  each  side  are  used  in  regular  order.  At  the  end  of  the  month,  the  cash  book 
is  ruled  on  the  same  blue  lines  on  each  side,  thus  beginning  the  new  month  on  the  same  blue  lines  on 
each  side.  This  is  always  the  case,  no  matter  if  there  are  only  a  few  entries  on  one  page,  and  all  the 
lines  on  the  other  are  used.  The  first  page  of  a  cash  book  is  never  used.  The  even  pages  always  rep- 
resent the  receipts,  or  debit  side;  the  odd  pages,  the  payments,  or  credit  side.  Thus  page  two  is 
the  debit  side,  and  page  three  the  credit  side;  page  four  is  the  debit  side,  and  page  five,  the  credit 
side,  etc. 

§  115.  To  Prove  Cash.  If  all  transactions  In  which  cash  is  received  are  entered  on  the  debit 
side,  and  all  transactions  in  which  cash  is  paid,  are  entered  on  the  credit  side,  the  difference  must  be 
the  amount  of  money  on  hand.  This  may  be  in  the  bank,  the  safe,  or  a  part  in  each  place.  To  prove 
cash,  add  the  debit  side  and  place  the  total  in  small  pencil  figures  just  beneath  the  last  amount  en- 
tered; add  the  credit  side,  and  write  the  total  in  small  pencil  figures,  just  beneath  the  last  amount 
entered;  on  scratch  paper  add  the  balance  on  hand  at  the  beginning  of  the  month,  to  the  receipts, 
and  from  this  amount  deduct  the  payments;  the  result  will  be  the  cash  on  hand,  as  explained.  Thfe 
pencil  figures  on  each  side  will  be  the  total  of  all  amounts  written  above;  hence,  when  cash  is  proved, 
all  amounts  entered  below  the  last  preceding  pencil  figures  are  added  to  them.  The  cash  book  is 
not  ruled  until  the  end  of  the  month. 

§  116.  Posting  from  the  Sales  Book,  Journal  and  Gash  Book.  When  transactions  are  being 
recorded  in  these  three  books,  post  the  amounts  in  the  following  order:  Sales  book,  journal,  debit 
side  of  the  cash  book  and  credit  side  of  the  cash  book.    Note  detailed  information  in  §§  117 — 120. 

§  117.  Posting  from  the  Sales  Book.  Each  amount  written  in  the  second  column  is  posted 
to  the  debit  side  of  the  account  written  on  the  same  line  with  it,  which  is  the  name  of  the  person  or 
firm  to  whom  the  sale  was  made.  The  posting  is  indicated  by  writing  the  page  of  the  ledger  in  the 
L.  F.  column  at  the  left  of  the  name  of  the  account,  and  the  page  of  the  sales  book  in  the  L.  F. 
column  in  the  ledger;  place  the  letter  "S"  to  the  left  of  the  page  to  show  the  book  of  original  entry. 

The  Merchandise  account  is  not  credited  with  each  sale,  but  with  the  total  sales  at  the  end  of 
the  month,  or  when  the  Trial  Balance  is  made. 

Each  page  in  the  sales  book  is  footed  and  the  total  carried  forward  to  the  top  of  the  next.  A 
single  red  line  should  be  drawn  across  the  second  column  on  the  next  or  last  blue  line  at  the  bot- 
tom of  the  page.  The  total  is  written  just  beneath  this,  and  on  the  same  line  with  the  total  write, 
"Carried  forward."  At  the  top  of  the  next  page,  on  the  first  blue  line,  write,  "Brought  forward," 
and  place  the  total  of  the  preceding  page  in  the  second  money  column  on  the  same  line.  Illustra- 
tion No.  33  shows  the  correct  ruling  at  the  end  of  the  month. 

§  118.  Posting  from  the  Journal.  Each  amount  in  the  debit  column  is  posted  to  the  debit 
side  of  the  account  written  on  the  same  line  with  it.  Each  amount  written  in  the  credit  column  is 
posted  to  the  credit  side  of  the  account  written  on  the  same  line  with  it.  See  §  60.  Special  terms  on 
invoices  and  the  time  on  notes  is  written  in  the  explanation  column  of  the  fedger  on  the  same  line 
with  the  amount.    The  letter  "J"  is  used  to  show  the  book  of  original  entry. 

§  119.  Posting  from  the  Debit  Side  of  the  Cash  Book.  Each  amount  in  the  first  money 
column  is  posted  to  the  credit  side  of  the  account  written  on  the  same  line  with  it.  The  posting  is 
indicated  by  writing  the  ledger  page  in  the  L.  F.  column  at  the  left  of  the  amount  and  the  cash 
book  page  in  the  L.  F.  column  in  the  ledger.  The  letter  "C"  should  be  written  to  the  left  of  the 
page  in  the  ledger,  to  show  the  book  of  original  entry. 

§  120.    Posting  from  the  Credit  Side  of  the  Cash  Book.    Each  amount  in  the  first  money 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


83 


column  is  posted  to  the  debit  side  of  the  account  written  on  the  same  line  with  it.  The  posting  is 
indicated  by  placing  the  ledger  page  in  the  L.  F.  column  at  the  left  of  the  name  and  the  page  of  the 
cash  book  in  the  L.  F.  column  in  the  ledger.  The  letter  "C"  should  be  written  to  the  left  of  the 
page  in  the  ledger,  to  show  the  book  of  original  entry. 

The  Cash  account  is  not  debited  for  the  total  of  the  debit  side  and  credited  for  the  total  of  the 
credit  side,  because  the  cash  book  represents  the  Cash  account,  and  no  Cash  account  is  necessary 
in  the  ledger  when  the  cash  book  is  kept. 

NOTE. — Some  bookkeepers  prefer  keeping  a  Cash  account  in  the  ledger.  When  this  is  done,  the  total  receipts  of 
cash  are  posted  to  the  debit  side,  and  the  total  payments,  to  the  credit  side,  these  are  posted  at  the  end  of  the  month, 
or  when  the  cash  book  is  ruled. 


QUESTIONS. 


I. 
2. 


10 


II 


12 


13 


14. 


15- 


16. 


17. 


Define  the  sales  book.     (§  113.) 

What  class  of  transactions  are  entered  in 

the  sales  book?     (§  113.) 
What   are   the   three   steps   necessary   for 

entering  a  transaction  in  the  sales  book? 

(§113) 
Why  are  the  items  included  in  the  sale 

described  in  the  sales  book?    (§  113,  ^  i.) 

What   does   the   total   of   the   sales   book 

show?     (§  113,  ^  2.) 
At  the  end  of  the  month  to  what  account 

in  the  ledger  is  the  total  of  the  sales 

book  posted?     (§113,   Tf  2.) 
Define  the  cash  book.     (§  114.) 

Why  are  the  receipts  entered  on  the  debit 

side?     (§  114.) 
Why  are  payments  entered  on  the  credit 

side?     (§  114.) 
Why   are   these  two  sides  opposite   each 

other?     (§  114.) 
What  account  in  the  ledger  does  the  cash 

book  represent?      (§  114.) 
What  transactions  are  entered  on  the  debit 

side  of  the  cash  book?     (§  114,  ^f  i.) 
Describe    the    three    steps    necessary    for 

entering  a  transaction  on  the  debit  side 

of  the  cash  book?     (§  114,  ^  i.) 
What  does  the  total  of  the  debit  side  of  the 

cash  book  represent?     (§  114,  ^  i.) 
What  transactions  are  entered  on  the  cred- 
it side  of  the  cash  book?     (§  114,  ^  2.) 
Describe  the  three  steps  necessary  to  enter 

a  transaction  on  the  credit  side  of  the 

cash   book.      (§114,   ^2.) 
How  many  lines  are  used  for  the  entry? 

(§114,  If  2.) 
What   does   the   total   of   the   credit   side 

represent?      (§114,    H  2.) 


19- 


20. 


21. 


22. 


23. 


24. 


25- 


26. 


27. 


28. 


29. 


30. 


31- 


32. 


33- 


34. 


Describe    the    form    of    the    cash    book. 

(§114.  1I3-) 
What    do    even    pages    represent?      Odd 

pages?     (§  114,  T[3.) 
Describe  the  method  of  proving  cash  when 

the  cash  book  is  used.     (§  115.) 
Why  does  the  difference  between  the  two 

sides  of  the  cash  book  equal  the  amount 

of  money  on  hand  or  on  hand  and  in  the 

bank?     (§  115.) 
Describe  the  method  of  posting  from  the 

sales  book.     (§  117.) 
Why  is  it  necessary  to  foot  each  page  and 

carry  the  total  forward?     (§  117.) 
Describe   the   method  of   forwarding   the 

totals  of  each  page.     (§  117.) 
To  what  account  in  the  ledger  is  the  total 

of  the  sales  book  posted  at  the  end  of 

the  month?     (§  117.) 
Why    is    Merchandise   not   credited    with 

each  sale?     (§  117.) 
Describe  the  method  of  posting  from  the 

journal.     (§  60,  §  118.) 
Describe  the  method  of  posting  from  the 

debit  side  of  the  ca^h  book.     (§  119.) 
Why  is  the  total  of  the  debit  side  of  the 

cash  book  not  posted  to  the  cash  ac- 
count in  the  ledger?     (§  119.) 
Describe  the  method  of  posting  from  the 

credit  side  of  the  cash  book.     (§  120.) 
Why  is  the  total  of  the  credit  side  of  the 

cash    book   not   posted    to   the   ledger? 

(§  120.) 
When  posting  from  the  sales  book,  journal, 

and  cash  book,  where  does  the  book- 
keeper place  the  check  marks? 
How  does  the   bookkeeper  indicate  that 

the  various  amounts  have  been  posted 

to  the  ledger? 


84 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  121.  Property  Purchased  for  Use  in  the  Business.  In  every  business  it  is  necessary  to 
purchase  certain  property  for  use  in  the  business.  This  property  is  not  to  be  sold,  but  is  purchased 
because  it  is  necessary.  This  includes  desks,  safes,  chairs,  shelving,  show  cases,  scales,  horses,  wagons, 
automobiles,  machinery,  and  any  other  property  that  may  be  needed.  Property  of  this  kind  must 
of  necessity  decrease  in  value  because  of  its  use.  The  use  of  the  property  will,  to  a  certain  extent, 
determine  the  decrease  in  value.  Machinery,  which  is  in  constant  use,  will  wear  out  much  quicker 
than  desks,  showcases,  shelving,  etc.     Read  §  21  ^2. 

There  are  two  methods  of  keeping  accounts  with  property  of  this  kind.  One  is  to  have  the  account 
show  the  present  value  of  the  property,  and  the  other  the  cost  value.  The  first  method  will  be  used 
in  this  set. 

FURNITURE  AND  FIXTURES  ACCOUNT. 

§  122.  The  Object  of  this  Account  is  to  show  the  cost  of  property  purchased  for  use  in  the  office 
and  store  room,  such  as  desks,  typewriters,  filing  cabinets,  show  cases,  scales,  etc.  This  property  is 
not  bought  to  be  sold,  but  to  be  used  in  the  business.  The  name  of  each  article  should  be  written 
in  the  explanation  column  in  the  ledger.  Where  a  number  of  articles  are  in  use,  it  is  best  to  keep  a 
permanent  list  in  a  book  especially  prepared  for  this  purpose. 


Debit  Furniture  and  Fixtures: 
^  I.     For  the  present  value  of  furniture  and 

fixtures  on  hand  at  the  beginning  of 

the  business. 
^  2.     For  the  cost  of  any  property  of  this  kind 

purchased. 


Credit  Furniture  and  Fixtures: 
^  3.     With  the  selling  price  of  any  property, 

the  value  of  which  was  charged  to  this 

account. 
T[  4.     With  the  inventory  or  present  value  of 

property    at    the    close    of    the    fiscal 

period. 
^  5.     With  the  amount  of  depreciation,  which 

is  the  difference  between  the  value  at 

the  beginning  of  the  period  and  at  the 

end. 

\  6.  The  Difference  between  the  two  Sides  of  this  Account  will  show  the  value  of  the  property, 
but  it  is  not  used  in  making  the  Financial  statement,  the  inventory  or  present  value,  and  the  depre- 
ciation being  considered. 

^  7.  To  Close  the  Furniture  and  Fixtures  Account.  Enter  the  inventory,  which  is  the  present  value 
of  the  property,  on  the  credit  side,  in  red  ink,  also  the  depreciation,  which  is  the  difference  between  the 
inventory  and  the  present  cost  value,  on  the  credit  side  in  red  ink.  The  two  amounts,  added  to 
any  that  may  appear  on  the  credit  side,  will  make  the  account  balance;  hence,  it  is  ruled  and  footed. 
The  amount  of  the  depreciation  is  transferred  to  the  Profit  and  Loss  account,  or  some  expense 
account  and  the  inventory  is  brought  down  on  the  debit  side,  in  black  ink,  under  date  of  the  day 
following  the  closing.    See  illustration  No.  36. 


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Illustration  No.  36.     Furniture  and  Fixtures  Account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  85 

EXERCISES  IN  FURNITURE  AND  FIXTURES  ACCOUNT. 

The  following  exercises  are  given  to  familiarize  the  student  with  the  various  debits  and  credits 
that  affect  the  Furniture  and  Fixtures  account,  and  the  form  of  closing.  The  references  are  to  §  122. 
Work  these  out  on  ledger  paper,  and  present  for  approval.     See  illustration  No.  36. 

EXERCISE  No.  25.  February  12th,  paid  cash  for  desk,  $35.00;  chair,  $5.00  (^  2);  23d,  bought 
from  Cullen  &  Shields,  on  account,  one  show  case,  $25.00  (^  2) ;  28th,  the  Financial,  and  Profit  and  Loss 
statements  are  to  be  made,  and  the  books  closed.  $5.00  deduction  is  made  for  depreciation  in  value 
(^^  4  and  5).       See  illustration  No.  36,  for  form  of  account,  method  of  ruling,  etc. 

EXERCISE  No.  26.  January  ist,  furniture  and  fixtures  on  hand  valued  at  $250.00  (T[i); 
20th,  bought  12  chairs  for  $14.00.  (^  2).  26th,  bought  a  Remington  typewriter  for  $100.00. 
(^2).  March  25th,  Paid  for  office  partition,  $36.25.  April  29th,  paid  for  scales  $45.00.  (1[  2). 
June  6th,  sold  desk  (on  hand  January  ist)  for  $26.50  (T[  3) ;  30th,  the  Financial,  and  Profit  and  Loss 
statements  are  to  be  made,  and  the  books  closed.  A  5%  deduction  is  made  for  depreciation  in  value 
of  furniture  and  fixtures  on  hand  (^  4  and  ^  5).  This  5%  is  calculated  on  the  difference  of  the  account. 

EXERCISE  No.  27.  July  4th,  bought  a  safe  for  $150.00  (^  2);  i6th,  bought  standing  desk  for 
$25.00  (1[2);  i8th,  bought  stool  for  $5.00  (^2);  August  nth,  bought  scales  for  $40.00  (^2);  i8th, 
bought  six  chairs  for  $9.00  (^  2) ;  Sept.  28th,  bought  filing  cases,  $100.00  (T[  2) ;  Oct.  19th,  bought  an 
Underwood  typewriter  for  $100.00  (.^2);  31st,  bought  six  pair  trucks,  $25.00  (^[2);  Nov.  26th,  sold 
one  section  of  filing  case  for  $16.50  (T[  3) ;  Dec.  9th,  bought  show  case,  $35.00  (^  2) ;  nth,  bought  two 
counters  and  three  tables  for  store  room  for  $42.50  (^  2);  31st,  at  the  time  the  Financial  statement 
is  made,  a  5%  deduction  is  made  for  depreciation  in  value  (^H  4  and  5).  (Calculate  the  5%  on  the 
difference  and  not  on  the  debit  side.) 

NOTES  RECEIVABLE  ACCOUNT. 

§  123.  This  Account  is  Kept  to  Show  the  Value  of  each  note  (§  99)  or  acceptance  (§  96, 
^  i)  received  and  paid.  This  refers  to  notes  and  acceptances  received  from  customers,  as  a  credit  on 
account.  An  accepted  draft  (§  99,  ^  i),  is  regarded  as  a  note,  as  it  is  a  written  promise  to  pay  mone>- 
at  a  fixed  time. 

Debit  Notes  Receivable:  Credit  Notes  Receivable: 

^  I.     For     the     face  of     each     note     or     ac-  ^4.     For     the     face    of     each    note    when    it 

cepted  draft  on  hand  at  the  beginning  is  paid. 

of  the  business.  T[  5.     For     the     face     of     each    note    or    ac- 

^  2,     For    the    face    of    each    note     and     ac-  cepted    draft    discounted. 

ceptance    received.      (Unless    a    Notes  t  6.     For     the     face     of    each    note    or    ac- 

Receivable  book    is  kept,   the    time    is  cepted   draft   transferred. 

written    in   the    explanation    column.)  NOTE. — Part  payments  are  indicated  by 

^  3.     For   the   face   of  each   time  draft  drawn  letters,  the  same  as  personal  accounts.     (§  29, 

on  a  customer  and  accepted  by  him.  Note,  page  19.) 
The  debit  side  is  always  the  larger. 

^  7.  The  Balance  of  this  account  is  the  value  of  notes  or  accepted  drafts  belonging  to  the  business, 
and  must  appear  as  a  resource  on  the  Financial  statement.  As  the  resources  are  listed  in  the  order 
of  their  availability,  the  Notes  Receivable  should  appear  next  after  Merchandise  inventory. 

^  8.  To  Close  the  Notes  Receivable  Account..  Usually  this  account  is  not  closed  unless  it  balances, 
that  is,  the  two  sides  are  equal.  If  a  payment  of  any  one  note  balances  the  account  at  a  certain  period, 
it  is  ruled  with  a  single  red  line,  the  same  as  a  personal  account.    Pencil  footings  show  that  the  totals 


86 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


on  each  side  are  equal.  If  the  account  is  ruled,  and  the  balance  brought  down  or  forwarded  to  another 
page,  single  and  double  red  lines  are  used,  and  the  footings  entered  in  black  ink.  The  difference  is 
entered  on  the  credit  side,  in  red  ink,  and  brought  down  on  the  opposite  side  in  black  ink  (§  88,  jf  2). 


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Illustration  No.  37.     Notes  Receivable  Account. 
EXERCISES  IN  NOTES  RECEIVABLE  ACCOUNT. 

The  following  exercises  are  given  to  familiarize  the  student  with  the  various  debits  and  credits 
affecting  the  Notes  Receivable  account  and  the  method  of  ruling.  The  references  are  to  §  123.  He 
will  work  these  out  on  ledger  paper  and  present  to  the  teacher  for  approval.  See  illustration  No.  37. 
^t,  EXERCISE  No.  28.  February  i6th,  received  a  fifteen-day  note  for  $42.30  (*[f  2) ;  24th,  received 
a  ten-day  note  for  $42.25;  March  ist,  received  a  thirty-day  note  for  $87.65;  3d,  Re- 
ceived a  twenty-day  note  for  $39.50;  3d,  received  check  for  $42.30  in  payment  of  note  due  today 
(If  4);  5th,  received  check  for  $42.25  for  note  due  today  (If  4);  8th,  received  a  thirtv-day  note  for 
$52.39(112). 

EXERCISE  No.  29.  April  5th,  received  a  sixty  day  note  for  $129.62  (If  2);  May  6th,  received 
a  thirty-day  note,  $379-59-  12th,  received  a  three-month  note,  $1,462.30.  ,  June  ist, 
Hall  Bros,  accepted  our  draft  at  ten  days  for  $500.00,  on  account  (1|  3) ;  5th,  received  $379.59  for 
note  due  today  (1[  4) ;  loth,  transferred  note  received  April  5th  i^  6) ;  nth,  received  $500.00  for  Hall 
Bros.'  draft  (1[  4) ;  20th,  received  a  ninety-day  note  for  $800.00. 

EXERCISE  No.  30.  July  ist,  at  the  beginning  of  the  business  there  were  three  notes  on  hand; 
one  for  $150.00,  dated  May  i8th,  due  in  sixty  days;  one  for  $300.00,  dated  June  25th,  due  in  sixty 
days,  and  one  for  $175.00,  dated  June  29th,  due  in  sixty  days  (1[  i);  i6th,  received  a  ninety-day  note 
for  $862.50;  17th,  received  $150.00  for  note  due  today  (T[  4) ;  Aug.  9th,  received  a  thirty-day  note 
for  $975.80;  1 8th,  received  a  sixty-day  note  for  $329.48;  20th,  C.  A.  Dow  accepted  our 
thirty-day  draft  for  $650.00  (1[  3) ;  24th,  received  cash,  $300.00,  in  payment  of  note  due;  Sept. 
1st,  received  a  sixty-day  note  for  $119.98;  8th,  received  check  for  $975.80  in  payment  of  note 
due  today;  loth,  received  check  for  $175.00  in  payment  of  note;  loth,  transferred 
Dow's  draft  for  $650.00  to  D.  C.  Miller,  on  account  (H  6) ;  25th,  received  sixty-day  note  for  $150.00; 
29th,  received  $862.50  in  payment  of  note;  30th,  transferred  note  for  $119.98  to  Day  Bros.,  on 
account  (If  6). 

NOTES  PAYABLE  ACCOUNT. 

§  124.  The  Object  of  this  Account  is  to  show  the  amount  owed  by  the  business,  as  evidenced 
by  written  obligations,  which  are  notes  (§99)  or  accepted  drafts  (§96).  This  account  is  the  opposite 
of  the  Notes  Receivable. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


87 


Debit  Notes  Payable: 
^  I.     With     the    face     of     each    note    or    ac- 
cepted draft  when  paid  by  the  business. 


NOTE: — Part  payments  are  indicated  by  let- 
ters the  same  as  personal  accounts. 
(§  29,  Note.) 


Credit  Notes  Payable: 
^  2.     For    the    face    of    each    note    owed    at 

the  beginning  of  the  business. 
^  3.     For   the    face    of    each    note   signed    by 

business. 
^  4.     For  the   face    of    each    time    draft    ac- 
cepted.    (If  a    Notes  Payable  book  is 
not  kept,  the  time  of  each  note  should 
be  written  in  the  explanation  column.) 
The  credit  side  is  always  the  larger. 

^  5.  The  Balance  of  this  Account  shows  the  amount  the  firm  owes  on  notes  and  accepted  drafts, 
and  is  a  liability.     It  appears  first  in  the  list  of  liabilities  shown  on  the  Financial  statement. 

Tf  6.  To  Close  the  Notes  Payable  Account.  Usually  this  account  is  not  closed  except  when  it  bal- 
ances. If  at  any  time  the  payment  of  a  note  or  draft  makes  the  two  sides  equal  at  some  particular 
point,  it  is  ruled  by  a  single  red  line,  the  same  as  a  personal  account.  If  the  balance  is  to  be  brought 
down  or  transferred  to  a  new  page,  enter  the  balance  on  the  debit  side  in  red  ink;  rule  the  account 
with  single  and  double  red  lines;  enter  the  footings  in  black  ink  and  bring  the  balance  down  or  trans- 
fer it  to  a  new  page  on  the  credit  side  in  black  ink. 


^^^^ 


J^ 
/^ 


yf/ 


/0 


Illustration  No.  38.     Notes  Payable  Account. 

EXERCISES  IN  NOTES  PAYABLE  ACCOUNT.  ^ 

r 

The  following  exercises  are  given  to  familiarize  the  student  with  the  debits  and  credits  affecting 

the  Notes  Payable  account.  The  references  are  to  §  124.  He  will  work  them  out  on  ledger  paper  and 
present  to  the  teacher  for  approval.     See  illustration  No.  38. 

EXERCISE  No.  31.  February  20th,  gave  twenty-day  note  for  $96.00,  in  full  of  account  (^  3); 
22d,  accepted  ten-day  draft,  I47.75,  in  full  of  account  (T[  4) ;  March  5th,  paid  ten-day  draft,  $47.75 
(1[  i);  6th,  accepted  a  fifteen-day  draft  in  full  of  account,  $378.25  (T[  4) ;  8th,  accepted  a  ten-day 
draft,  $155.00,  in  full  of  account;  12th,  paid  twenty-day  note  for  $96.00  (^  i);  13th,  gave  ninety- 
day  note  for  $229.78,  in  full  of  account;  19th,  paid  ten-day  draft,  $155.00;  21st,  borrowed 
$400.00  from  the  bank  on  thirty-day  note  (1[3);  21st,  paid  fifteen-day  draft,  $378.25;  31st, 
prepaid  ninety-day  note  for  $229.78   (1[  i). 

EXERCISE  No.  32.  October  ist,  gave  sixty-day  note  for  $416,29  (^  3) ;  26th,  gave  thirty-day 
note  for  $321.82;  November  nth,  gave-ninety  day  note  for  $722.80;  25th,  paid  thirty-day 
note,  $321.82  (T[  i);  27th,  accepted  thirty-day  draft  for  $500.00  (1[  4) ;  30th,  gave  thirty-day  note  for 
$350.00;  December  i6th,  paid  sixty-day  note  for  $416.29;  19th,  gave  sixty-day  note  for 
$379.62;  2ist,  accepted  ten-day  draft  for  $50.00  ;  27th,  paid  thirty-day  draft,  $500.00;  30th,  gave 
a  ninety-day  note  for  $411.49;  31st,  paid  thirty-day  note,  $350.00. 

EXERCISE  No.  33.  At  the  beginning  of  the  business  January  2d,  we  owed  two  notes,  one 
dated  December  24th,  due  in  thirty  days,  for  $1,500.00;  the  other  dated  December  15th,  due  in  sixty 
days,  $1,000.00  (^  2) ;  3d,  paid  thirty-day  note  for  $1,500.00;  9th,  gave]  sixty-day  note  for  $276.45; 


88 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


February  ist,  gave  thirty-day  note  for  $239.80;  14th,  paid  $1,000.00  note  due  today  (^  i),by  check, 
for  $500.00  and  a  new  note,  for  $500.00  due  in  sixty  days,  with  interest  (1[  3).  (The  face  of  the  old 
note  is  entered  on  the  debit  side,  and  the  new  note  on  the  credit  side.  No  record  is  made  of  the 
interest  until  it  is  paid.)  28th,  gave  thirty-day  note  for  $715.29;  March  5th,  accepted  sixty-day 
draft  for  $326.16;  12th,  accepted  ten-day  draft  for  $584.79;  22d,  paid  ten-day  draft,  $584.79;  30th, 
gave  ninety-day  note  for  $298.64;  31st,  paid  thirty-day  note  for  $715.29. 


QUESTIONS. 


4- 
5- 
6. 

7- 


9- 
10. 

II. 
12. 

13- 


What  kind  of  property  is  usually  pur- 
chased for  use  in  the  business?     (§  121.) 

Describe  the  two  methods  used  for  keep- 
ing these  accounts.     (§  121.) 

Define  Furniture  and  Fixtures  account. 
(§  122.) 

Name  the  two  debits.  (§  122,  ^[^  i  and  2.) 

Name  the  three  credits.   (§  122,  ^^  3 — 5.) 

What  does  the  difference  show?     (§  122.) 

What  does  it  represent  on  the  Financial 
statement?     (§  122.) 

What  does  it  represent  on  the  Profit  and 
Loss  statement?     (§  122.) 

Describe  the  method  of  closing  the  Fur- 
niture and  Fixtures  account.     (§  122.) 

Define    the    Notes    Receivable    account. 

(§  123.) 
Name  the  three  debits.    (§  123,  "[f^  i — 3.) 
Name  the  three  credits.    (§  123,  ^f  4 — 6.) 
Which  side  is  always  the  larger?     Why? 


14. 
15- 

16. 
17- 


18. 

19- 
20. 
21. 
22. 

23- 
24. 


What  does  the  balance  show?     (§  123.) 
What  does  it  represent  on  the  Financial 

statement?     (§  123.) 
Describe  the  method  of  closing  the  Notes 

Receivable  account.     (§  123.) 
If  only  a  part  of  a  note  is  paid,  how  would 
the    bookkeeper    indicate    the    note    on 
which  it  is  credited?      (See  Note,  §  29, 
page  19.) 
Define  the  Notes  Payable  account.    (§  124) 
Give  the  special  debit.     (§  124,  T[  i.) 
Name  the  three  credits.     (§  124,  ^f  2 — 4.) 
What  does  the  balance  show?     (§  124.) 
What  does  it  indicate  on  the  Financial 

statement?     (§  124.) 
Describe  the  method  of  closing  the  Notes 

Payable  account.      (§  124.) 
How   are  partial   payments  on   notes  in- 
dicated?    (§  29,   Note,  page  19.) 


§  125.  Trial  Balance,  February  28th.  As  explained  in  §  66,  the  Trial  Balance  is  a  list  of  all 
tl]^  open  accounts  on  the  ledger,  and  is  made  to  prove  that  the  two  sides  of  the  ledger  are  equal. 
The  instructions  (§  67)  for  taking  a  Trial  Balance,  January  31st,  can  be  applied  in  taking  this  Trial 
Balance. 

Each  account  on  the  ledger  that  has  more  than  one  amount  on  either  side  is  footed,  and  the 
total  placed  in  small  pencil  figures  just  beneath  the  blue  line  on  which  the  last  entry  has  been  made. 
The  difference  between  the  pencil  amounts  is  written  on  the  larger  side  in  small  pencil  figures  to  the 
left  of  the  last  entry  and  on  the  same  line.  These  must  be  written  below  the  balance  used  in  the  pre- 
ceding Trial  Balance,  otherwise  errors  may  be  made  in  transferring  the  balance  from  the  ledger  to 
the  Trial  Balance. 

The  accounts  are  listed  on  a  sheet  of  journal  paper  in  the  same  order  as  they  appear  in  the  ledger. 
As  the  Cash  account  is  represented  by  the  cash  book,  which  is  really  a  part  of  the  ledger,  it  must 
be  entered  on  the  Trial  Balance  and  may  be  written  first  or  the  next  after  Mr.  Goodwin's  name 
which  is  the  same  position  as  it  occupied  in  January. 

The  total  of  the  debit  column  of  the  Trial  Balance  must  equal  the  total  of  the  credit  column, 
because  the  first  represents  the  debit  side  of  the  ledger,  and  the  second,  the  credit  side.  The  ledger 
is  in  balance  because  the  debits  and  credits  in  each  transaction  are  equal.  If  the  Trial  Balance 
does  not  balance,  the  error  must  be  detected  by  checking,  as  instructed  in  §  65. 

§  126.  Financial  Statement,  February  28th.  As  explained  in  §  79,  Tf^  i — 3,  the  Financial 
statement  shows  the  resources,  liabilities  and  present  capital.  The  active  resources  (^  i)  are  listed 
first  and  in  the  order  of  their  availability.     At  this  time  they  consist  of  the  Cash,  as  shown  by  the 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


89 


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Z^iL. 


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Illustration  No.  39. 


90 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


cash  balance  in  the  cash  book;  Merchandise  as  per  inventory  of  the  goods  in  stock,  February  28th; 
Notes  Receivable  (amounts  due  on  notes) ;  Accounts  Receivable  (total  amount  due  from  the  ten 
persons  who  owe  us  for  goods  sold  them  on  time).  The  fixed  assets  (^  i)  are  listed  next.  At  this 
time  they  are  represented  by  the  Furniture  and  Fixtures  account.  The  present  value  of  this  prop- 
erty is  $5.00  less  than  the  amount  shown  by  the  account,  the  deduction  being  made  for  the  use  of 
the  property.  The  present  value,  which  is  the  cost  value,  less  the  $5.00,  is  used  in  making  the  Finan- 
cial statement.  The  liabilities  (^  2)  are  listed  next  and  in  the  following  order:  Notes  Payable  (amounts 
due  on  notes  and  accepted  drafts) ;  Accounts  Payable  (total  amount  due  the  seven  persons  from 
whom  merchandise  was  purchased  on  time). 

The  difference  between  the  total  resources  (IJ  i)  and  the  total  liabilities  (^  2)  is  Mr.  Goodwin's 
present  interest  in  the  business  (^[3).  The  difference  between  this  and  his  investment  or  present 
capital  at  the  beginning  of  February,  which  is  the  beginning  of  the  current  fiscal  period,  is  his  net 
gain.     See  illustration  No.  39. 

§  127.  Profit  and  Loss  Statement,  February  28th.  As  explained  in  §  80,  ^^  i — 5,  the  Profit 
and  Loss  statement  shows  the  gross  trading  profit  (1[  i),  other  profits  (^  2),  and  the  total  profit  for 
the  period;  the  operating  expense  (^f  3) ,  other  losses  (^  4) ,  and  the  total  loss  for  the  period,  and  the 
net  gain  (^5). 

The  gross  trading  profit  is  ascertained  by  the  Trading  statement,  which  may  be  made  a  part 
of  the  Profit  and  Loss  statement  or  a  separate  statement.  At  this  time  the  Merchandise  account 
is  the  only  account  that  affects  the  Trading  statement,  and  the  gross  trading  profit  is  ascertained 
by  making  the  Trading  statement  a  part  of  the  Profit  and  Loss  statement.  The  debit  side  of  the 
Merchandise  account  shows  the  inventory  February  ist,  and  the  cost  of  merchandise  purchased 
during  February.  The  credit  side  shows  the  returns  from  sales  made  during  February.  The  present 
value  of  goods  on  hand  is  represented  by  the  inventory  made  February  28th,  and  shows  the  goods 


<  "^-^^jz^ryf/ 


^^^^ 


/  /  ^ 


Illustration  No.  40. 


7 


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^ 


^it 


iL^ 


-2^ 


^A=^A 


^J-'Ji/ 


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>^>2^ 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


91 


yet  remaining  from  those  on  hand  at  the  beginning  of  February  and  purchased  during  this  month. 
The  first  part  of  illustration  No  40  shows  the  method  of  ascertaining  the  gross  trading  profit,  or  the 
profit  made  by  buying  and  selling  merchandise.  At  this  time,  this  is  the  only  profit  represented  on 
the  Profit  and  Loss  statement. 

The  losses  (If  3)  are  represented  by  the  Expense  account,  and  the  decrease  in  value  of  the  fur- 
niture and  fixtures.     The  total  of  these  two  accounts  is  the  total  losses  for  the  fiscal  period. 

The  difference  (T[  5)  between  the  total  gains  as  represented  by  the  gross  trading  profit,  and  the 
total  losses  as  represented  by  the  Expense  account  and  the  loss  on  furniture  and  fixtures,  is  the  net 
gain  for  the  fiscal  period.     See  illustration  No.  40. 

As  explained,  no  facts  shown  by  either  the  Financial,  or  Profit  and  Loss  statement  can  be  ac- 
cepted as  correct  unless  the  net  gain  shown  by  the  Profit  and  Loss  statement  is  the  same  as  the  dif- 
ference between  the  present  capital  at  the  end  of  the  fiscal  period  and  the  present  capital  at  the  be- 
ginning of  the  period,  as  shown  by  the  Financial  statement.  Illustrations  Nos.  39  and  40  show  the 
correct  forms. 

§  128.  Closing  the  Ledger,  February  28th.  Closing  an  account  means  to  transfer  the  bal- 
ance to  another  account,  and  as  explained  in  §  84,  closing  the  ledger  means  closing  those  accounts 
that  afi'ect  the  Profit  and  Loss  statement.  At  this  time  there  are  five  accounts  to  close:  the  Merchan- 
dise account  is  closed  into  the  Profit  and  Loss  account  (§  86,  ^^  i — 7,  and  §  31,  U  10) ;  the  Expense 
account  is  closed  into  the  Profit  and  Loss  account  (§  87,  ^^  i  and  2,  and  §  32,  ^  6).  The  Furniture 
and  Fixtures  account  is  closed  into  the  Profit  and  Loss  account  (§  86,  ^^  i — 7,  and  §  122,  ^  7).  The 
Profit  and  Loss  account  is  closed  into  W.  H.  Goodwin's  account  (§  87,  ^^  i  and  2,  and  §  33,  T[6). 
VV.  H.  Goodwin's  account  is  closed,  as  instructed  in  §  34,  ^  10,  and  §  88,  ^  3,  and  the  Present  capital 
brought  down  on  the  credit  side,  under  date  of  March  1st.     See  illustrations  Nos.  4,  5,  36,  6  and  7. 

§  129.  Proof  Sheet,  February  28th.  After  the  ledger  is  closed,  a  Trial  Balance  is  made  to 
prove  that  the  work  has  been  done  correctly.  This  is  the  "Proof  Sheet"  (§  90)  and  will  contain 
all  those  accounts  on  the  Financial  statement.  It  must  balance,  because  the  debits  and  credits 
have  been  kept  equal  in  closing. 

The  thoughtful  student  will  note  that  the  value  of  the  difference  between  all  open  accounts 
on  the  ledger,  after  it  is  closed,  is  the  same  as  the  present  capital,  or  the  owner's  account.  In  other 
words,  after  his  liabilities  are  paid,  the  remainder  of  the  resources  is  his  interest  in  the  business. 


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Illustration  No.  41. 


92  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


JOURNAL  ENTRIES,  NOTES  AND  DRAFTS. 

The  student  will  make  the  journal  entries  for  the  following  transactions.  These  are  to  be  made 
on  journal  paper  or  paper  ruled  similar  to  it.  When  the  exercises  are  completed,  present  the  work 
to  the  teacher  for  inspection  and  approval. 

EXERCISE  No.  34.     i.     Gave  Simpson  Bros,  our  sixty-day  note,  dated  today,  for  $250.00, 
to  apply  on  account.     (Debit,  §30,  ^2;  Credit,  §  124,  T[  3.) 

2.     John  Howard  gave  us  his  thirty-day  note,  dated  today,  for  $128.36,  in  full  of  account.  (Debit, 
§  123,  t2;  Credit,  §29,  H  5-)  _ 

»      3.     Sold  James  Morgan,  on  his  note  for  thirty  days,  225  bu.  oats  at  30  cents.    (Debit,  §  123, 

1[  2;  Credit,  §31,  Us-) 

4.  Received  $150.00  in  cash  from  A.  C.  Williams,  in  payment  of  his  note  due  today.     (Debit, 
§27,  ^2;  Credit,  §^123,  ^4.) 

5.  Accepted  Martin  Bros.'  ten-day  draft  for  $329.86,  in  full  of  account.    (Debit,  §30,  ^3; 
Credit,  §  124,  T[  3.)    ^ 

6.  Received   $286.48   from   M.   J.  Thompson,   on   his    note,   due  today.      (Debit,  §27,   ^[2; 
Credit,  §  123,  ^  4.) 

7.  Bought  from  the  Hall  Safe  &  Lock  Co.,  for  $200.00,  one  fireproof  safe,   and  gave  in  pay- 
ment check  for  $50.00,  and  our  note  due  in  sixty  days,  for  $150.00. 

8.  Drew  a  ten-day  draft  on  A.  (?:  Weaver  for  $150.00  for  balance  he  owes  us,  and  sent  the 
draft  to  Arnold  Bros.,  to  apply  on  account  we  owe  them. 

Transactions  of  this  kind  do  not  occur  very  often  in  business,  but  when  they  do,  the  person  to 
whom  the  draft  is  given  is  debited,  and  the  one  on  whom  it  is  drawn,  credited. 

9.  Bought  from  Payne  &  Hart,  merchandise  per  invoice  of  this  date,  $869.48.     Gave  in  pay- 
ment our  ninety-day  note,  dated  today. 

10.  James  Milligan  gave  us  his  note  for  $125.00,  due  in  thirty  days  from  today,  to  apply  on 
account. 

11.  Received  from  R.  M.  Upman,  a  ten-day  draft  on  Hall  Bros.,  for  $150.00,  to  apply  on 
account  Upman  owes  us.  .  Hall  Bros,  have  accepted  the  draft. 

12.  Purchased  from  Remington  Typewriter  Co.,  one  No.  11  Remington  typewriter,  for 
$100.00.  Gave  in  payment  our  check  for  $25.00,  and  three  notes  for  $25.00  each,  due  in  thirty, 
sixty,  and  ninety  days. 

In  this  transaction  there  is  one  debit  and  four  credits — one  for  the  cash  paid  and  one  for  each 
note.      (§  139). 

'  13.     Drew  a  ten-day  draft   on   Yeager  Bros,  for  $354.81,  amount    they  owe  us,  and  sent  the 
same  to  Dawson  &  Perry  to  apply  on  account  we  owe  them. 
See  instructions  in  No.  8. 

14.  J.  J.  Darring  gave  us  his  note  for  $175.00,  due  in  sixty  days  from  today,  and  his  check 
for  $86.14,  in  full  of  account  he  owes  us. 

This  transaction  requires  two  debits  and"  one  credit. 

15.  Bought  from  the  Consolidated  Millings  Company,  merchandise  per  invoice  of  this  date, 
$689.28.  Gave  in  payment  a  note  which  we  hold  (Notes  Receivable)  for  $127.65,  our  note  due  in 
thirty  days  for  $400.00,  and  our  check  for  the  balance. 

16.  Borrowed  $400.00  from  the  bank  on  our  thirty-day  interest-bearing  note   for  this  amount. 

17.  Accepted  Marblehead  &  Co.'s  draft  at  ten  days  for  $681.29,  in  full  of  account. 

18.  Paid  Donaldson  Bros.  $250.00,  in  payment  of  a  note  which  is  due  today. 

19.  Our  note  for  $500.00  is  due  at  the  bank  today.  Gave  them  a  check  for  $250.00,  and  a  new 
note  with  interest  for  $250.00  in  settlement  of  this. 

"20.     Received  check  for  $161.28  from  L.  E.  Watters  for  his  note  due  today. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


93 


21.  Accepted  Martin  Bros.'  ten-day  draft  for  $150.00,  to  apply  on  account. 

22.  Paid  our  note  for  $200.00  due  today. 

23.  Received  from  W.  H.  Weaver  a  draft  for  $165.25,  drawn  on  A.  H.  Willis.  Mr.  Willis  has 
accepted  the  draft. 

24.  Our  note  for  $800.00,  in  favor  of  Stillman  Bros.,  is  due  today.  We  have  settled  the  same 
by  giving  them  our  check  for  $300.00,  and  two  interest-bearing  notes  for  $250  each,  due  in  thirty 
and  sixty  days,  respectively 

25.  Robert  Davis  owes  us  a  note  for  $627.65,  which  is  due  today.  He  settles  the  same  by 
giving  us  his  note  for  $300.00,  a  note  which  we  owe  that  has  been  transferred  to  him  for  $127.65, 
and  his  check  for  the  difference. 

26.  Paid  our  note  due  today  by  check,  $186.42. 

27.  A.  L.  Day  owes  us  $582.65.  He  settles  the  account  by  giving  us  his  note  due  in  thirty 
days  for  $250.00,  a  note  which  we  owe  (Notes  Payable),  but  has  been  transferred  to  him  for  $210.00, 
and  his  check  for  the  difference. 

28.  Accepted  Borches  &  Co.'s  thirty-day  draft  for  $327.85,  in  full  for  invoice  due  today. 

29.  We  owe  Davis  Bros.  $865.75,  which  is  due  today.  We  make  settlement  as  follows:  Our 
note  for  $300.00,  a  note  signed  by  them  which  we  hold,  for  $209.11,  a  ten-day  draft  on  Abbott 
Bros.,  for  $104.65,  and  our  check  for  the  difference. 

30.  We  owe  Anderson  Bros.  $427.55.  They  accept  our  check  for  $127.55,  ^^^  three  notes  of 
equal  amount  dated  today,  due  in  thirty,  sixty,  and  ninety  days,  in  full  of  account. 


REVIEW  QUESTIONS. 


9- 

10. 
II. 

12. 
13- 


Define  Commercial  Paper  and  give  three  14. 

examples. 

Distinguish  between  a  sight  draft  and  a  15. 

time  draft. 

Is  it  necessary  to  accept  a  sight  draft?  16. 

What    kind    of    commercial    paper    is    re- 
garded as  cash?  17. 

Describe  the  method   of  opening   an   ac- 
count with  the  bank.  18. 

Why  does  the  bank  supply  deposit  tickets 

for  the  use  of  its  depositors?  19. 

Describe   the   correct   method   of   writing 
a  check. 

Why  is  it  necessary  when  a  person  signs  20. 

another  person's  name  or  the  name  of 
a  firm  to  write  his  name  under  it,  pre-  21. 

ceded  by  the  words  "by"  or  "per?" 

What  two  new  books  are  introduced  in  22. 

this  set? 

Define  each  and  explain  its  advantages.  23. 

Describe    the    method    of    posting    from 
each  of  these  two  books. 

What  three  new  accounts  are  introduced?  24. 

State  the  object  of  each  and  give  at  least 
one  debit  and  credit  of  each. 


Describe  the  method  of  taking  the  Trial 
Balance  February  28th.     (§  125.) 

Describe  the  method  of  making  the  Finan- 
cial statement  February  28th.     (§  126.) 

Describe  the  method  of  making  the  Profit 
and  Loss  statement.     (§  127.) 

Describe  the  method  of  closing  the  ledger 
February  28th.     (§  128.) 

Describe  the  method  of  taking  the  Proof 
Sheet  February  28th.     (§  129.) 

What  accounts  are  represented  on  the 
Financial  statement  that  were  not  rep- 
resented in  January?     (§  126.) 

What  new  accounts  are  represented  on  the 
Profit  and  Loss  statement?     (§  127.) 

After  the  books  are  closed  February  28th, 
what  is  Mr.  Goodwin's  present  capital? 

Are  there  any  accounts  on  the  ledger  that 
represent  this? 

At  the  time  the  books  were  closed  Feb- 
ruary 28th,  what  time  represents  the 
current  fiscal  period? 

Is  it  customary  in  business  to  close  the 
books  at  the  end  of  each  month?    Why? 


94 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


MARCH. 

A  continuation  of  the  February  business,  introducing  the  Purchases  Book,  Real  Estate  accounts, 
Interest  account,  and  a  general  review  of  January  and  February. 

THE  PURCHASES  BOOK. 

§  130.  The  Object  of  this  Book  is  to  contain  a  record  of  all  merchandise  purchased  on  time,  and 
no  other  transactions  are  entered  in  it.  When  kept,  transactions  in  which  goods  are  purchased  are  re- 
corded in  this  book  and  not  in  the  journal.  In  the  average  mercantile  or  trading  business,  there  will 
not  be  as  many  entries  in  this  book  as  in  the  sales  book,  because  the  goods  are  purchased  in  large  quan- 
tities, and  sold  to  the  trade  in  smaller  quantities.  However,  there  will  always  be  a  sufficient 
number  of  credit  purchases  to  justify  the  keeping  of  the  purchases  book. 

The  record  in  this  book  must  show  the  date,  the  name  of  the  person  from  whom  the  goods  were 
purchased,  the  date  of  the  invoice,  the  terms,  and  the  amount.  This  information  is  written  on  one  line 
in  the  order  mentioned.  There  are  various  forms  used,  depending  entirely  upon  the  nature  of  the  busi- 
ness, and  the  desire  of  those  in  charge  of  the  office.  Illustration  No.  42  shows  the  form  to  be  used  in 
this  set.     The  address  of  each  person  or  firm  may  be  shown  if  desired. 

The  invoices  are  filed  in  the  same  order  as  they  are  entered  in  the  purchases  book.  This  affords 
a  ready  reference  to  the  items  if  desired.  Some  bookkeepers  number  the  invoices  and  file  them  in 
numerical  order.    The  date  of  entry  should  be  indicated  on  the  face  of  the  invoice. 


/f/ 


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jr 
7 


Illustration  No.  42.     Purchases  Book,  March  i — 15. 


-r^ 


i^-i?- 


\  I.  Posting  from  the  Purchases  Book.  Each  amount  written  in  the  first  column  is  posted  to  the 
credit  side  of  the  name  of  the  person,  firm  or  corporation  written  on  the  same  line  with  it.  If  there 
are  any  special  terms,  these  must  be  written  in  the  explanation  column  of  the  ledger.  The  page  of 
the  ledger  is  entered  in  the  purchases  book  in  the  ruled  column  at  the  left  of  the  name,  to  show  that 
the  amount  has  been  posted.  The  page  in  the  purchases  book  is  entered  in  the  folio  column  of  the 
ledger  for  reference.  Always  post  the  amount  first,  the  page  of  the  purchases  book  next,  then  the 
date  and  the  special  terms  last.  These  are  entered  in  the  explanation  column.  At  the  end  of  the 
month,  or  when  a  Trial  Balance  is  to  be  taken,  the  purchases  book  is  ruled  and  footed  as  shown  in 
illustration  No.  42,  and  the  total  posted  to  the  debit  side  of  the  Merchandise  account. 

When  transactions  are  being  recorded  in  the  purchases  book,  sales  book,  journal  and  cash  book, 
post  in  the  following  order:  Sales  book,  purchases  book,  journal,  debit  side  of  the  cash  book  and  credit 
side  of  the  cash  book. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  95 

REAL  ESTATE. 

§  131.  Real  Estate  is  Immovable  Property,  such  as  land  and  the  buildings  and  other  improve- 
ments that  go  to  make  it  valuable.  Real  Estate  may  be  purchased  by  a  business  to  be  used  as  a  home 
for  the  business,  or  for  a  speculative  purpose.  The  value  of  real  estate  depends  largely  upon  the  lo- 
cation; it  may  decrease  or  increase  owing  to  conditions  of  the  surrounding  property.  For  this  reason 
property  purchased  to  be  used  as  a  home  for  the  business  may  decrease  in  value,  not  only  because  it 
is  used,  but  because  of  local  conditions.  On  the  other  hand,  it  might  increase  in  value.  It  is  also 
possible  for  the  property  to  produce  a  revenue,  as  all  of  the  buildings  might  not  be  needed  for  use  in 
the  business.  While  real  estate,  purchased  for  use  in  the  business,  is  one  of  the  fixed  investments, 
(§21,  T[  2),  yet  it  differs  from  other  property  of  this  kind,  in  that  it  may  show  a  decrease  in  value, 
even  more  than  the  wear  and  tear,  or  it  may  show  an  increase  or  produce  a  revenue.  For  this  rea- 
son, it  is  better  practice  to  keep  two  accounts  with  real  estate;  one  to  show  the  cost  of  the  property, 
and  the  other  to  show  the  expense  of  maintaining  the  property,  or  the  revenue  which  the  property 
produces. 

REAL  ESTATE  ACCOUNT. 

§  132.  The  Object  of  this  Account  is  to  show  the  cost  of  the  property,  which  includes  the  pur- 
chase price,  and  any  amount  paid  for  improving  it,  but  not  for  keeping  it  in  repair.  If  it  is  necessary  to 
put  a  new  roof  on  the  building,  this  does  not  increase  the  value  of  the  property,  but  is  necessary  in  order 
that  the  property  may  be  used.  If  the  original  roof  was  made  of  wood,  and  the  new  roof  of  slate, 
this  increases  the  value  of  the  property;  the  difference  between  the  cost  of  the  wood  and  slate  roof 
must  be  charged  to  the  Real  Estate  account. 

One  account  may  be  kept  with  Real  Estate,  and  this  account  may  represent  the  cost  value  of  all 
real  estate  owned.  As  a  general  rule,  when  property  is  purchased  for  use  in  the  business,  only  one 
account  is  necessary,  and  the  term  Real  Estate  is  sufficient.  If  a  number  of  pieces  are  owned,  it  is 
better  to  keep  an  account  with  each  piece  of  property,  and  describe  it  by  street  number,  or  some 
other  method,  so  the  bookkeeper  will  know  the  property  designated. 

Debit  the  Account  with  Real  Estate:  Credit  the  Account  with  Real  Estate: 

^  I.     For  the  cost  value  of  real  estate  on  hand  T[  6.     For  the  cost  price  of  all  property  sold. 

at  the  beginning  of  the  business.  ^  7.     For  any  amounts  received  from  the  in- 

*|[  2.     For  the  cost  of  all  real  estate  purchased.  surance  company  in  payment  for  build - 

^3.     For  the  expense  of  securing   title,   etc.,  ings  destroyed. 

when  this  is  paid  by  the  purchaser. 
T[  4.     For  any  improvements  that  increase  the 

value  of  the  property. 
^  5.     For  carrying  charges  until  the  property 

becomes   productive. 

If  property  is  sold  at  a' less  price  than  the  cost,  the  difference  is  charged  to  the  Expense  and  Rev- 
enue account.     If  it  is  sold  at  a  greater  price  than  the  cost,  the  difference  is  credited  to  this  account. 

Tf  8.  The  Difference  between  the  two  Sides  of  the  Real  Estate  Account  will  show  the  cost  value  of 
the  property  owned,  and  is  a  resource.  As  it  represents  one  of  the  fixed  investments,  it  is  listed  with 
these  on  the  Financial  statement. 

Tl  9.  To  Close  the  Real  Estate  Account.  This  account  is  not  closed  unless  all  the  property  has 
been  sold,  or  it  is  desired  to  bring  the  balance  down  or  carry  it  forward  to  a  new  page.  In  the  first 
case,  it  is  ruled  with  single  and  double  red  lines,  and  footed  in  black  ink;  double  lines  only  may  be  used 
when  there  is  but  one  amount  on  each  side.  In  the  second  case,  the  balance  is  entered  on  the  credit 
side,  in  red  ink,  the  account  ruled  and  footed,  and  the  balance  brought  down,  in  black  ink,  on  the  same 
page,  or  carried  forward  to  the  new  page.  Illustration  No.  43  shows  the  correct  closing  of  the  Real 
Estate  account  at  the  end  of  March. 


96 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  43.     Real  Estate  Account. 

REAL  ESTATE  EXPENSE  AND  REVENUE  ACCOUNT. 

§  133.  The  Object  of  this  Account  is  to  show  the  cost  of  maintaining  the  real  estate,  and  the 
amounts  received  for  rent.  It  is  necessary  to  keep  an  Expense  and  Revenue  account  with  each  piece 
of  real  estate  owned,  if  separate  accounts  are  kept  with  each  property. 


Debit  R.  E.  Ex.  and  Revenue  Account: 
^  I.  For  any  amount  paid  for  maintaining  the 
property,  such  as  painting,  papering, 
replacing  the  roof  with  the  same  kind  of 
material,  reflooring,  etc.,  also  amount 
paid  for  insurance  on  building. 
^  2.  For  the  difiference  between  the  cost  and  sel- 
ling price,  if  the  property  is  sold  at  less 
than  cost. 


Credit  R.  E.  Ex.  and  Revenue  Account: 
^  3.     For  amounts  received  in  payment  for  rent. 
^  4.     For  the  difference  between  the  selling  price 

and  cost,  if  the  property  is  sold  for  more 

than  the  cost. 


^  5.  The  Difference  between  the  two  Sides  of  this  Account  shows  a  loss  or  gain;  a  loss  if  the  debit 
side  is  larger,  and  a  gain  if  the  credit  side  is  larger.  It  appears  in  the  Profit  and  Loss  statement  as  a 
special  profit  or  loss,  or  a  part  of  the  General  Administrative  expense.  If  the  real  estate  is  purchased 
for  use  in  the  business,  and  there  is  no  income,  the  difiference  must  be  listed  with  the  expenses,  as  it 
takes  the  place  of  rent,  which  is  a  part  of  the  General  Administrative  expense.  If  the  property  is  not 
used  as  a  home  for  the  business,  the  difference  is  a  special  profit  or  loss. 

^--  ^  6.  To  Close  the  Real  Estate  Expense  and  Revenue  Account.  The  balance  is  closed  into  the  Profit 
and  Loss  account;  it  is  entered  on  the  smaller  side  with  red  ink,  the  account  is  ruled  with  single  and 
double  red  lines,  footed  in  black  ink,  and  the  balance  transferred  to  the  opposite  side  of  the  Profit 
and  Loss  account  with  black  ink.     See  illustration  No.  44. 


^^5= 


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2^^ 


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Illustration  No.  44.     Real  Estate  Expense  and  Revenue  Account. 

EXERCISES  IN  REAL  ESTATE  ACCOUNTS. 

The  following  exercises  are  given  to  illustrate  both  Real  Estate  accounts,  and  the  student  must 
determine  the  account  to  be  debited  or  credited  by  the  references.  Work  out  the  exercises  on  ledger 
paper  and  hand  to  the  teacher  for  approval. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  97 

EXERCISE  No.  35.  March  ist,  paid  $1,000.00  for  store  house  and  lot  (§  132,  ^2);  6th,  paid 
$25.00  for  repairs  (§  133,  ^  i);  30th,  sold  the  house  and  lot  for  $1,200.00  (§  132,  T[  6  and  §  133, 1[4); 
31st,  credited  the  account  with  rent  for  the  month,  $35.00  (§  133,  ^{3). 

Illustrations  Nos.  43  and  44  show  these  accounts  worked  out  and  closed. 

EXERCISE  No.  36.  January  ist,  paid  $3,000.00  for  real  estate  consisting  of  a  house  and  lot 
at  No.  416  Broadway  (§  132,  ^  2);  1st,  paid  our  attorney  $25.00  for  looking  up  the  title  (§  132,  ^3); 
5th,  paid  $26.00  for  repainting  the  outside  of  the  building  (§  133,  ^  i);  7th,  paid  $19.00  for  insur- 
ance on  building  (§  133,  ^  i);  9th,  paid  $12.00  for  new  steps  (§  133,  ^  i);  February  ist,  received  rent, 
$30.00  (§  133,  ^  3) ;  5th,  paid  $150.00  for  a  new  porch  as  per  contract  (§  132,  ^  4) ;  March  ist,  received 
$35.00  rent;  5th,  sold  the  vacant  lot  adjoining  the  one  on  which  the  building  is  located  for 
$900.00;  estimated  cost,  $600.00  (§  132,  f  6,  and  §  133,  ^  4);  6th,  paid  for  repairing  roof,  $5.00  (§  133, 
T[l);  April  1st,  received  rent,  $35.00;  12th,  paid  for  new  floor,  $8.50  (§  133,  ^  i);  May  ist, 
received  rent,  $35.00;  9th,  paid  $125.00  for  a  new  sidewalk  (§  132,  T[  4);  June  ist,  received 
rent,   $35.00;    6th,   paid   for   repairing  floor,  $4.00  (§    133,   ^   i);  July   ist,   received   rent,  $35.00. 

EXERCISE  No.  37.  At  the  beginning  of  business,  July  ist,  had  real  estate  on  hand  valued 
at  $3,500.00  (§  132,  ^  i);  19th,  paid  for  building  new  warehouse  per  contract,  $1,000.00  (§  132,  ^  2); 
20th,  paid  for  new  roof,  $150.00  (§  133,  ^  i);  31st,  paid  for  insurance  on  building,  $40.00  (§  133,  ^  i); 
31st,  credited  the  account  with  our  rent,  $40.00  (§  133,  T[  3) ;  August  ist,  received  $15.00  for  rent  of 
space  on  second  floor;  12th,  paid  for  painting  floors,  $12.50;  19th,  paid  for  installing  new  elevator, 
$800.00;  20th,  received  $10.00  rent  for  space  on  second  floor;  30th,  credited  account  with  our  rent, 
$40.00;  October  9th,  paid  for  new  door,  $9.75;  28th,  paid  for  new  sidewalk,  $75.00;  30th,  credited 
the  account  with  $40.00,  our  rent;  November  6th,  paid  for  glass  in  the  windows,  $6,50;  30th,  credited 
account  with  our  rent,  $40.00;  December  31st,  credited  the  account  with  our  rent,  $40.00;  31st,  re- 
ceived rent  for  space  on  second  floor,  $15.00;  31st,  sold  the  property  for  $5,000.00. 

INTEREST. 

§  134.  Interest  is  the  Use  of  Money;  but  as  it  is  usually  not  considered  until  the  money  repre- 
senting the  value  is  paid  or  collected,  it  is  best  defined  as  money  paid  or  collected  for  use  of  money, 
whether  paid  in  advance  or  at  maturity.  To  illustrate:  A  borrowed  $100.00  from  B  on  twelve  months' 
time,  and  at  the  end  of  the  year  paid  the  $100.00  borrowed  and  $6.00  interest,  or  $106.00.  The  $6.00  is  in- 
terest as  it  is  money  paid  for  the  use  of  money.  If,  when  A  borrowed  the  money  from  B,'  he  had  re- 
ceived only  $94.00,  and  agreed  to  pay  $100.00  at  the  end  of  the  twelve  months,  the  $6.00  would 
have  been  interest  just  the  same,  because  it  was  paid  for  the  use  of  the  money.  It  is  customary 
with  banks  to  collect  the  interest  in  advance.  This  can  be  done  by  deducting  it  from  the  face  of  the 
paper,  and  crediting  the  depositor  with  the  proceeds,  or  requiring  the  depositor  to  give  his  check  for 
the  interest  and  credit  him  with  the  face  of  the  paper.  To  illustrate:  A  borrowed  $500.00  from  his 
bank,  giving  his  note  payable  in  ninety  days  from  date,  as  evidence  of  the  obligation.  The  bank  charges 
him  eight  per  cent  interest.  When  he  presents  his  note  for  credit,  he  will  either  have  to  give  the  bank 
his  check  for  $10.00  and  receive  credit  for  $500.00,  or  receive  credit  for  only  $490.00.  The  result  is 
the  same  in  either  case,  and  the  $10.00  is  regarded  as  interest.  Sometimes  interest  paid  in  advance 
is  termed  "Discount,"  but  as  there  are  other  discounts  to  be  considered  in  the  subject  of  bookkeeping, 
it  is  better  to  consider  all  amounts  paid  for  the  use  of  money  as  "Interest,"  no  matter  whether  the 
amounts  are  paid  at  the  time  the  debt  is  created  or  at  the  time  it  is  paid. 

To  prevent  unreasonable  charges  for  the  use  of  money,  the  various  states  have  made  laws  fixing 
the  rate  of  interest  to  be  collected.  This  is  called  the  legal  rate,  and  all  amounts  collected  in  excess 
of  the  legal  rate  are  usurious.  The  only  means  of  avoiding  the  usury  law,  that  is,  collecting  m£)re  than 
the  legal  rate  of  interest,  is  to  have  the  note  made  payable  to  a  third  party  and  endorsed  by  him.  It 
then  becomes  negotiable,  and  the  owner  can  dispose  of  it  at  any  price,  and  the  purchaser  can  not  be 
held  for  collecting  more  than  the  legal  rate. 


98 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


The  rate  per  cent  charged  for  money  is  estimated  for  one  year.  Thus,  a  legal  rate  of  six  per 
cent  would  mean  $6.00  on  each  one  hundred  dollars  for  a  year.  If  the  note  was  for  a  less  time  than 
this,  only  the  proportionate  part  of  the  six  dollars  would  be  collected.  Thus  the  interest  on  $100.00 
at  six  per  cent  is  $6.00  for  one  year,  $12.00  for  two  years,  $3.00  for  six  months,  $1.50  for  three  months, 
$1.00  for  two  months,  etc, 

INTEREST  ACCOUNT. 


§  135.  The  Object  of  this  Account  is  to  keep  a  record  of  all  amounts  paid  and  received  for  inter- 
est, whether  these  amounts  are  paid  and  received  at  the  time  the  debt  is  created  or  at  the  time  it  is 
paid.  The  business  man  borrows  money  in  order  to  meet  obligations  contracted  for  the  benefit  of 
the  business.  He  may  borrow  this  money  from  the  bank  on  his  own  note,  or  may  discount  notes 
received  from  customers.  He  may  pay  the  interest  and  get  credit  for  the  face  of  the  note, 
or  allow  the  interest  to  be  deducted  from  the  face,  and  get  credit  for  the  proceeds.  In  either  case  the 
amount  deducted  is  interest,  because  it  is  money  paid  for  the  use  of  money. 


Debit  the  Interest  Account: 

^  I.     For  all  amounts  paid  by  us  as  interest  at  ^  4. 

the  time  the  obligation  is  due. 

^  2.     For  all  amounts  paid  by  us  as  interest  ^  5. 

when  paid  at  the  time  the  loan  is  made 
(in  advance.)  This  includes  accumu- 
lated interest  on  interest-bearing  notes 
accepted  by  us.  ^  6. 

T[  3.  For  all  amounts  deducted  from  notes  we 
discount  (transfer  to  others),  which  is 
the  difference  between  the  face  value  of 
the  note  and  the  amount  we  receive. 


Credit  the  Interest  Account: 

For  all  amounts  paid  to  us  as  interest  when 
paid  at  the  maturity  of  the  obligation. 

For  all  amounts  paid  to  us  as  interest  when 
paid  in  advance.  This  includes  accum- 
ulated interest  on  interest-bearing  notes 
transferred  by  us. 

For  all  amounts  deducted  for  prepaying 
notes  which  we  owe,  or  allowed  us  on 
notes  we  purchase,  which  is  the  differ- 
ence between  the  face  value  of  the  note 
and  the  amount  we  pay,  or  for  which  we 
give  credit. 


The  above  outline  of  debits  and  credits  of  the  Interest  account  applies  to  general  business  trans- 
actions, and  does  not  include  special  accounts  made  necessary  on  long  time  mortgages,  bonds,  etc. 

^  7.  The  Balance  of  the  Interest  Account  shows  a  profit  or  loss — a  loss  if  the  debit  side  is  the  larger, 
and  a  profit  if  the  credit  side  is  the  larger.  It  appears  on  the  Profit  and  Loss  statement  as  one  of 
the  special  profits  or  losses. 


^^ 

^ 

^7 

^ 

^ 

XA^ 

s 

Illustration  No  45.     Interest  Account. 

^8.  To  Close  the  Interest  Account.  The  balance  is  closed  into  the  Profit  and  Loss  account  at  the 
time  the  ledger  is  closed.  If  the  debit  side  is  the  larger,  enter  with  red  ink  on  the  credit  side  as  follows: 
The  date,  the  words  Profit  and  Loss,  the  page  of  the  Profit  and  Loss  account  in  the  ledger,  and  the 
amount  of  the  difference.  Rule  the  account  with  single  and  double  red  lines,  and  enter  the  total  of  each 
side,  between  the  single  and  double  lines.  Use  black  ink  fpr  writing  the  totals.  If  the  credit  side  is 
the  larger,  the  entry  is  made  on  the  debit  side,  and  the  account  ruled  and  footed  in  the  same  manner. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING:*  ■   ;,   ;     .......  ..cjq 

— '-^r^:  ^  •. .'  1 1 ; ; '  W*' : '''. ;  '• 

The  difference  is  entered  in  the  Profit  and  Loss  account  on  the  opposite  side  from  which  it  appears 
in  the  Interest  account;  use  black  ink. 

The  account  may  have  an  inventory  because  there  may  be  interest  due  the  business  which  can 
not  be  collected  until  the  paper  is  due.  In  the  same  way  the  business  may  owe  interest  on  notes  that 
are  not  yet  due.  The  value  of  the  account  is  affected  by  the  inventory;  a  liability  inventory  increas- 
ing the  loss,  and  a  resource  inventory  increasing  the  gain. 


EXERCISES  IN  INTEREST  ACCOUNT. 

The  following  exercises  are  given  to  familiarize  the  student  with  the  various  debits  and  credits 
affecting  the  Interest  account.  These  are  to  be  worked  out  on  ledger  paper,  and  handed  to  the  teacher 
for  approval.  The  amount  of  the  interest  is  not  given  in  every  case.  When  not  given,  the  student 
ascertains  the  interest  by  subtracting  the  two  amounts  given.    The  references  are  to  §  135,  ^^  i — 6. 

EXERCISE  No.  38.  March  16,  borrowed  $400.00  from  the  bank  on  my  note  at  30  days.  Gave 
them  a  check  for  $2.6'j,m  payment  for  interest  at  8%.     (^  2.) 

March  21,  received  check  from  P.  A.  Banesforth  for  $88.09,  in  payment  for  note,  $87.65,  and 
interest  on  the  same,  44  cents.     (^  4) 

March  31,  gave  the  bank  a  check  in  payment  of  note  due  Dick,  McMillan  &  Co.,  $229.78,  and  in- 
terest on  same  to  date,  57  cents.     (^  i.) 

March  31st,  the  close  of  the  fiscal  period,  the  balance  of  this  account  is  closed  into  the  Profit 
and  Loss  account.     Illustration  No.  45    shows  the  account  worked  out  and  closed. 

EXERCISE  No.  39.  April  ist,  discounted  note  at  the  bank  and  gave  check  for  $7.88,  interest 
on  the  money  (^3). 

April  27th,  prepaid  our  note  for  $262.50  by  check  for  $259.87.  (The  difference  is  the  interest. 
116.) 

May  i6th,  gave  note  due  July  5th,  for  $450.00,  and  our  check  for  $7.50,  in  settlement  for  $450.00 
note  due  today  with  interest  (1[  i). 

May  27th,  Robert  Clark  prepays  his  note  of  $200.00  by  check  for  $197.50.  (The  difference  is 
the  interest.     (^  3). 

May  27th,  discounted  Anderson  Bros.'  note  for  $400.00  at  the  bank,  receiving  credit  for  $393.67, 
the  net  proceeds  (T[  3). 

June  5th,  prepaid  our  note  of  $500.00  by  check  for  $482.90  (T[6). 

June  30th,  gave  Borches  &  Co.  check  for  $416.50,  in  payment  of  note  for  $412.00,  and  the  inter- 
est on  the  same  (T[  i). 

June  30th,  when  the  books  are  closed,  the  balance  of  this  account  is  closed  into  the  Profit 
and  Loss  account. 

EXERCISE  No.  40.    July  17th,  gave  the  bank  a  check  for  $10.00,  to  pay  discount  on  note  (^f  2). 

July  27th,  received  check  from  Davis  Bros,  for  $287.65,  in  payment  for  balance  due,  $283.27, 
and  the  interest  (^4). 

July  31st,  C.  L.  Jackson  renewed  note  of  $500.00  due  today,  giving  in  payment  his  check  for 
$256.00,  and  a  new  note,  $250.00.  (The  difference  between  the  face  of  the  new  note  plus  the  check 
and  the  face  of  the  old  note,  is  the  interest.     ^  5.) 

August  17th,  gave  the  bank  a  check  for  $20.00,  to  pay  interest  on  the  note  renewed  (^  2). 

August  27th,  gave  Smith  &  Jones  a  check  for  $726.40,  in  payment  of  account  due  them,  $718.65, 
and  interest  (T[  i). 

September  9th,  received  $5.60  from  A.  B.  Day,  as  interest  on  note  which  he  owes  (T[  4). 

September  30th,  received  $16.65  from  D.  L.  Morris  interest  due  us  (^[4). 

October  27th,  discounted  M.  B.  Jacobs'  note  for  $552.65  at  the  bank,  and  received  credit  for  the 
proceeds,  $549.27  (^3). 


if>p,,..,.         .    ^2DTH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


November  6th,  gave  W.  H.  Davis  a  check  for  $206.50,  in  payment  of  $200.00  note  due  today, 
and  interest  on  the  same  (Ij  i). 

December  9th,  received  check  from  A.  H.  Bowers  for  $22.50,  interest  due  us  (^  4). 

December  28th,  borrowed  $2,000.00  at  the  bank,  and  received  credit  for  the  proceeds,  $1960.00(^1 3). 

December  31st,  the  books  are  closed  and  the  balance  of  this  account  is  closed  into  the  Profit 
and  Loss  account. 

§  136.  Rule  for  jlllalculating  Interest.  The  interest  on  any  sum  at  six  per  cent  for  six  days 
is  the  sum  with  the  decimal  point  moved  three  places  to  the  left.  Thus  the  interest  on  $962.37  for 
six  days  is  .96237  or  96  cents;  the  interest  on  $5,000.00  for  six  days  is  $5.00;  the  interest  on  $249.60 
for  six  days  is  $0.2496  or  25  cents;  the  interest  on  $91.65  is  $0.09165  or  9  cents. 

Ascertain  the  number  of  days  for  which  the  interest  is  to  be  calculated,  divide  this  number  by 
six,  and  multiply  the  amount  of  money  by  the  quotient.  The  result,  when  pointed  off  according  to 
the  rules  in  decimal  fractions,  will  be  the  interest  on  the  given  amount  for  the  given  time  at  six  per 
cent.  To  illustrate:  Calculate  the  interest  on  $942.75,  for  48  days,  at  six  per  cent.  Move  the  decimal 
point  three  places  to  the  left,  multiply  this  amount  by  (48  divided  by  six,)  8.  The  result  is,  754200. 
As  there  are  five  decimal  places  in  the  multiplicand,  there  must  be  five  decimal  places  in  the  product, 
which  gives  the  interest,  $7.54.  The  fraction  to  the  right  of  this  is  less  than  one-half,  and  is  not  used.  If 
it  had  been  one-half  or  more,  the  interest  would  have  been  $7.55.  Do  not  drop  the  fraction  until  the 
final  result  is  obtained. 

When  the  rate  of  interest  is  not  six  per  cent,  divide  the  amount  of  the  interest  at  6%  by  six;  this 
gives  the  interest  at  1% .  Multiply  this  by  the  given  rate  and  the  result  is  the  interest  on  the  given 
amount  at  the  given  rate.  To  illustrate:  Calculate  the  interest  on  $368.95  for  48  days,  at  8%  ;  $368.95 
with  the  decimal  point  moved  three  places  to  the  left  is  .36895.  48-7-6=8;  ,36895x8=2.95160 
(interest  at  6%).  2.95160-^6=  .49193  (interest  at  1%). 491 93  x8=3. 93544  or  $3.94,  interest  on  $368.95 
for  48  days,  at  8% . 

§  137.  Time.  In  practical  calculations,  the  time  is  not  given  and  must  be  ascertained  accord- 
ing to  the  date,  time  of  the  note,  maturity,  etc.  A  note  dated  March  6th,  and  due  in  ninety  days, 
is  due  ninety  days  from  that  date.  With  few  exceptions,  the  state  laws  require  only  the  date  of  the 
paper  or  the  date  it  is  due  to  be  used  in  calculating  the  time.  As  a  general  rule,  the  date  due  is  con- 
sidered. 

To  ascertain  the  due  date  of  a  ninety-day  note,  dated  March  6th,  omit  March  6th,  and  con- 
sider the  remaining  twenty -five  days  in  March;  add  to  this  a  sufficient  number  of  days  to  complete 
the  90  days,  which  will  include  the  30  days  in  April,  31  days  in  May  and  4  days  in  June  (25-f  30+ 
31  +4=90)-  The  best  method  to  ascertain  the  due  date  of  a  paper  is  to  subtract  the  day  it  is  dated 
from  the  number  of  days  in  the  month  in  which  it  is  dated.  Add  to  this  amount  the  days  in  the  suc- 
ceeding months  until  the  required  number  of  days  are  used.  The  number  of  days  in  the  last  month  is 
the  date  on  which  the  paper  is  due.  (Date  April  i6th,  time  90  days;  30-16  =  14;  14  -f3i  -f  30  -f-  14 
=  July  14th.)  A  note  dated  March  6th,  payable  in  three  months,  would  be  due  June  6th,  because 
the  number  of  months  are  stated  and  it  will  be  due  on  that  same  day  of  the  month  in  the  month 
the  number  of  months  in  advance  of  it.  The  maturity  of  the  note  does  not  affect  the  interest  calcula- 
tion when  interest  is  to  be  calculated  for  the  full  time  of  the  note;  but  it  does  affect  the  calculation, 
if  the  note  is  discounted,  or  paid  any  time  before  its  maturity.  If  the  due  date  is  Sunday  or  a  legal 
holiday,  the  paper  is  due  during  business  hours  of  the  preceding  or  following  day. 

§  138.  The  Face  Value  of  a  Note  is  the  amount  that  will  be  collected  at  maturity.  If  the 
note  does  not  bear  interest,  the  face  value  is  the  amount  stated  in  the  note.  If  it  does  bear  interest, 
the  face  value  is  the  amount  stated  in  the  note,  plus  the  interest  for  the  full  time.  If  a  note  is  executed 
for  $500.00,  and  due  in  ninety  days,  and  no  interest  is  mentioned,  the  face  value  of  this  note  is  $500.00, 
because  that  is  the  amount  that  will  be  collected;  if  the  note  states  that  it  is  with  interest,  at  6% 
for  ninety  days,  the  face  value  is  $507.50,  the  amount  plus  the  interest  at  6%  for  ninety  days.  The 
owner  of  a  note  does  not  need  to  accept  payment  until  it  is  due,  hence  the  face  value  is  the  value  of 
the  note  when  it  is  due.    The  owner  might  accept  a  less  amount  than  the  face  value  for  payment  be- 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTINCj?.""'  .\  i    J  j;^'.  ,'^3^.  j  , 

fore  maturity,  but  that  does  not  alter  the  face  value  of  the  note.  When  a  bank  purchases  a  note, 
the  face  value  is  considered,  and  the  interest  calculations  are  made  on  this.  The  face  value  is  sometimes 
termed  the  market  or  commercial  value. 

EXERCISES  IN  INTEREST  CALCULATIONS. 

The  following  exercises  are  given  the  student  that  he  may  be  prepared  to  make  the  interest  cal- 
culations required  in  the  bookkeeping  work.  While  the  student  of  bookkeeping  is  supposed  to  have 
a  knowledge  of  interest  and  discount,  yet  sometimes  this  is  not  sufficient.  In  order  to  successfully 
record  the  transactions,  it  is  necessary  that  he  be  capable  of  making  interest  calculations.  The  stu- 
dent will  make  the  journal  entries  for  the  transactions  and  submit  them  to  the  teacher  for  approval, 
at  the  same  time  submitting  all  the  interest  calculations  required  in  determining  the  amount  of  the 
interest.  The  Interest  account  is  debited  or  credited  according  to  §  135,  ^T[  i — 6,  and  money  paid, 
for  the  use  of  money,  either  in  advance  or  at  maturity,  is  regarded  as  interest.  Unless  otherwise  stated, 
the  interest  is  6%,  that  is,  $6.00  on  each  $100.00  for  one  year.     Consider  28  days  in  February. 

EXERCISE  No.  41.  March  ist,  received  from  Young  &  Doyle,  on  account,  ninety-day  note 
dated  Feb.  l6th,  for  $265.50,  less  interest  to  maturity.     (^  5.)     See  first  entry  in  illustration  No.  46. 

2d,  borrowed  $1,000  from  the  bank  on  our  ninety -day  note.  Received  credit  for  net  proceeds, 
face  of  note,  less  8%  (1j  2).    See  second  entry  in  illustration  No.  46. 

3d,  C.  H.  Granger  owes  us  $414.56.  He  settled  in  full  by  transferring  Robert  Dow's  ninety- 
day  note  for  $272.35,  dated  Jan.  16,  less  discount,  and  his  thirty-day  note  with  interest  for  the  balance. 
(This  note  is  worth  $272.35  at  maturity.  If  accepted  now,  the  cash  value  will  be  the  face  of  the  note, 
less  6%  interest  for  the  time  it  has  to  run.)      (^  5.)     See  third  entry  in  illustration  No.  46. 

4th,  we  owe  Donaldson  Bros.  $375.62.  We  settle  the  same  by  transferring  L.  D.  Arnold's  three- 
month  note  (Notes  Receivable)  for  $250.00,  dated  Feb.  12th,  less  8%  discount,  and  our  thirty-day 
note  with  interest  for  the  difference.     (^  3.)     See  fourth  entry  in  illustration  No.  46, 

5th,  we  hold  a  note  for  $375.00,  dated  Feb.  12,  due  in  four  months.  We  discount  this  at  the  bank 
at  8%,  and  receive  credit  for  the  proceeds.     (Debit,  §  27,  ^2  and  §  135,  ^3;  Credit,  §  123,  ^5.) 

6th,  we  owe  D.  H.  Addison  $614.65.  We  make  settlement  as  follows:  Our  interest-bearing 
note  dated  today  and  due  in  three  months,  for  $200.00,  W.  H.  Day's  ninety-day  note  (Notes  Re- 
ceivable) for  $300.00,  dated  February  28th,  less  discount,  and  our  check  for  the  difference.  (Debit, 
§  30,  ^^f  2,  4  and  I,  and  §  135,  II  3;  Credit,  §  124,  1[  3,  §  123,  1|  6,  §  27,  ^  4.) 

8th,  Mays  Bros,  owe  us  $412.50.      They  settle  this  by   transferring   W.  H.  James'   four-month      • 
note,  $275.00,  dated  Jan.  3d,  with  interest  from  date,  less  discount,  and  their  sixty-day  note,  dated 
today,  for  the  balance.     (Debit,  §123,  ^|  2,  twice,  §  135,  ^f  2;  credit,  §  29,  If  5,  and  §  135,  ^6.) 

9th,  borrowed  $1,000.00  from  the  bank  on  our  note  dated  today,  and  due  in  four  months.  Gave 
them  check  for  the  interest,  and  received  credit  for  the  face  of  the  note.  (Debit,  §  27,  ^  2,  and  §  135, 
^2;  credit,  §124,  ^f  3,  §27,  ^4). 

loth,  we  owe  a  note  of  $500.00,  dated  Jan.  9th,  and  due  in  six  months.  The  holder  accepts  our 
check,  less  6%  interest,  for  the  remaining  time.     (Debit,  §  124,  ^  i ;  Credit,  §  27,  T[  4  and  §  135,  ^  6.) 

nth,  Jones  Bros,  owe  us  $312.65.  They  agree  to  accept  a  sixty-day  draft  for  this  amount,  and 
we  have  drawn  on  them  through  the  bank.  Since  they  have  agreed  to  accept  the  draft,  the  bank 
allows  us  credit  for  the  proceeds,  charging  8%  interest.  (Debit,  §  27,  ^2,  and  §  135,  ^3;  Credit, 
§  29,  ^6.) 

I2th,  we  owe  the  bank  $1,000.00  on  a  note  due  today.  Have  settled  the  same  by  giving  them  a 
new  note  for  $500.00  due  in  ninety  days  from  today,  and  our  check  for  the  balance  and  interest  on 
the  new  note  at  8%.     (Debit,  §  124,  ^  i,  for  $1,000.00,  and  §  135,  ^  2;  Credit  §  124,  ^3,  and  §  27, 

13th,  transferred  W'.  H.  George's  ninety-day  note,  dated  March  3d,  for  $214.25,  to  Roberts  Bros., 
in  part  payment  of  amount  due  them  less  discount  on  the  note  at  6%.  (Debit  §  30,  ^  4,  and  §  135, 
I3;  Credit  §123,  1[6.) 

15th,  we  owe  C.  C.  Cring  $862.45.     We  have  a  note  signed  by  W.  O.  Wilhoit,  dated  February 


Cf         C    •      *i 


'ipa;..%-:r    t  -'.    '^TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 
[^^>l^Ji^r,A>%^ 

i6th,  and  due  in  four  months  with  interest,  for  $927.42,  Mr.  Cring  accepts  this  note  in  full 
settlement  of  our  account,  less  8%  discount  to  maturity,  and  gives  us  his  check  for  the  difference. 
(Debit,  §  30,  II  4;  §  135,  1  3.  and  §  27,  T[  2;  Credit,  §  123,  ^  6,   §  135,  T[  5.) 

i6th,  accepted  a  sixty-day  draft  drawn  by  Donaldson  Bros,  for  $127.65,  in  full  of  account.  (Debit, 
§  30,  1['3:  Credit,  §  124,  ^4;  §135,  ^5.) 

17th,  drew  draft  at  sixty  days  on  D.  D.  Malcolm,  for  $425.60,  in  full  of  his  account  due  us,  and 
sent  the  draft  to  A.  Y.  Yaeger  to  apply  on  account  we  owe  him,  less  discount  due  at  maturity  of 
draft.      (Debit  the  one  to  whom  the  draft  is  sent,  and  credit  the  one  on  whom  it  is  drawn.) 

1 8th,  Condon  Bros,  draw  a  sixty-day  draft  on  us  for  $200.00,  with  the  privilege  of  acceptance 
or  remitting,  less  discount.  We  send  them  check  for  the  proceeds.  (Debit,  §  30,  ^  i ;  Credit  §  27, 
If  4,  and  §  135,  ^  6.) 

19th,  we  owe  W.  H.  Good  a  note  of  $600.00  and  interest  on  the  same  for  four  months,  all  of  which 
is  due  today.  We  settle  as  follows:  A  three-month  note  for  $200.00,  which  we  hold  against  C.  H. 
Dair  (Notes  Receivable),  dated  February  12th,  less  discount;  our  thirty-day  note  with  interest  from 
date  for  $250.00,  and  our  check  for  the  difference.  (Debit,  §  124,  ^  i,  and  §  135,  ^  i  and  f  3;  credit, 
§  123,  1(6;  §  124,  Tl3;  §27,  ^4.) 

20th,  borrowed  $250.00  from  the  bank  on  sixty  days  time,  and  gave  them  our  check  for  the  in- 
terest at  8%,  receiving  credit  for  the  face  of  the  note.     (See  reference  for  transaction  of  the  9th.) 

22d,  we  owe  W.  H.  Brunner  &  Co.  $500.00.  Have  settled  the  same  by  transferring  James  Willis' 
three-month  note  for  $351.76,  dated  February  21st,  less  discount,  and  our  sixty-day  note,  with  interest, 
for  the  balance. 

23d,  drew  a  three-day  draft  on  Mays  Bros,  for  $416.65,  in  full  of  account,  and  sent  the  same  to 
C.  H.  Snider,  to  apply  on  account.     (See  explanation  under  transaction  of  the  17th.) 

24th,  we  owe  D.  H.  Ragland  a  note  for  $750.00,  dated  January  1st,  and  due  in  four  months.  He 
agrees  to  accept  payment  now,  less  interest  at  8%  to  maturity,  and  we  have  given  him  our  check 
for  the  net  amount.     (Debit,  §  124,  ^  i;  Credit,  §  27,  T[  4,  and  §  135,,^  6.) 

25th,  we  owe  the  bank  a  note  of  $2,000.00,  which  is  due  today.  We  have  settled  the  same  as 
follows:  D.  H.  Bliss'  note  for  $372.65,  dated  January  3d,  and  due  in  four  months,  with  interest;  R.  H. 
Payne's  six-month  note  for  $600.00,  dated  December  6th;  our  three-month  note  for  $500.00;  and 
a  check  for  the  difference.  They  deduct  8%  discount  from  the  face  of  each  of  these  notes.  (Debit, 
§  124,  t  I,  and  §  135,  T[  3;  Credit,  §  123,  ^  6,  twice;  §  124,  ^  3;  §  135,  ^5.  interest  on  note  transferred; 

§27,1(4.) 

26th,  accepted  a  ten-day  draft  drawn  by  Donaldson  Bros,  in  payment  of  invoice  for  $467.85, 
dated  the  24th,  terms,  net,  60  days.  They  allow  6%  interest  for  sixty  days,  and  draw  the  draft  for 
the  amount  of  invoice  less  the  interest.     (Debit,  §  30,  ^  3;  Credit,  §  124,  1[  4;  §  135,  ^  6.) 

27th,  borrowed  $1,000.00  from  the  bank  on  our  note  of  ninety  days,  and  received  credit  for  the 
proceeds,  less  8%.     (Debit,  §  27,  ^  2;  §  135,  1[  2;  Credit,  §  124,  ^  3.) 

29th,  we  hold  a  note  for  $722.65,  signed  by  W.  H.  Crouch,  dated  December  15th,  due  in  five 
months,  with  interest  from  date.  We  discount  this  at  the  bank,  and  receive  credit  for  the  proceeds, 
less  8%  discount.  (Debit,  §  27,  T[  2  and  §  135,  T[  3;  Credit,  §  123,  ^  5,  and  §  135,  ^  5,  interest  on 
note  transferred.) 

30th,  James  Smithson  owes  us  a  note  for  $526.47,  dated  December  9th,  and  due  in  six  months. 
He  wants  to  prepay  this,  and  we  have  accepted  his  check,  less  8%  interest  for  the  remaining  time. 
(Debit,  §  27,  t  2;  §  135,  Tl3;  Credit,  §  123,  t  4.) 

31st,  we  owe  James  Robinson  a  note  of  $400.00,  dated  December  31st,  and  due  in  three  months, 
with  interest  from  date.  We  hold  his  note  for  $216.55,  dated  February  9th,  and  due  in  ninety  days. 
He  agrees  to  accept  this  note,  less  discount  at  8%  to  maturity,  and  our  check  for  the  balance  in  settle- 
ment, and  we  have  accepted  his  proposition.     (Debit,  §  124,  T[  i ;  §  135,  H  i ;  §  135,  H  3;  Credit,  §  123, 

14;  §27,11 2.)     . 


20 TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


103 


§  139.  Compound  Journal  Entries.  A  transaction  may  affect  more  than  "two  accounts;  that 
is,  two  kinds  of  property  may  be  purchased,  and  only  one  given  in  exchange  for  it,  or  one  kind  of  prop- 
erty, purchased  and  two  or  more  kinds  given  in  exchange  for  it.  This  same  principle  applies 
with  services.  Thus  a  journal  entry  may  be  made  up  of  one  or  more  debits,  and  one  or  more  credits. 
No  matter  how  many  debits  and  credits  there  may  be,  the  total  of  the  debits  must  equal  the  total 
of  the  credits;  because  the  value  of  the  property  or  services  received  always  equals  the  value  of  the 
services  or  property  exchanged.  Where  there  are  two  or  more  amounts  in  either  the  debit  or  credit 
entry,  they  should  be  added,  and  the  total  written  just  beneath  the  last  entry  in  small  pencil  figures. 


^^ 


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Illustration  No.  46.     Compound  Journal  Entries. 


104 


20TH  CENTURY  BdDKKEEPING  AND  ACCOUNTING. 


If  the  entries  in  the  journal  do  not  balance,  then  the  ledger  will  not  balance,  because  the  debit  amounts 
in  the  journal  are  posted  to  the  debit  side  of  the  ledger,  and  the  credit  amounts  in  the  journal  to  the 
credit  side  of  the  ledger.  Some  bookkeepers  foot  each  page  in  the  journal  to  prove  that  the  debits 
and  credits  are  correct.  This  is  the  best  practice,  and  the  student  should  follow  this  plan  in  all 
his  work.  Illustration  No.  46  shows  some  of  the  forms  of  compound  journal  entries.  These  are  the 
same  as  the  first  four  entries  in  exercise  No.  41. 

QUESTIONS. 


I. 

2. 

3- 


4- 
5- 
6. 


10 


II 


12 


13 


14 


15 


Define  the  purchases  book.     (§  130.)  16. 

Describe  the  method  of  posting  from  the 

purchases   book.      (§  130,  Tf  i.)  17. 

What  account  is  debited  at  the  end  of  the  18. 

month  with   the  total  of  the   purchases 

book?      (§  130,  ^  I.)  .19. 

Define  real  estate.      (§  131.)  20. 

Define  the  Real  Estate  account.     (§  132.)  21. 

If  more  than  one  piece  of  property  is  owned,  22. 

is  it  better  to  keep  one  Real  Estate  ac-  23. 

count  or  an  account  with  each  piece  of 

property?     (§  132.).  24. 

Distinguish  between  real  estate  and  other 

property  purchased  for  use  in  the  busi-        '  25. 

ness.      (§  131.) 
Why  is  it  best  to  keep  one  account  with  26. 

the  value  of  real  estate  or  each  piece  of 

real    estate    and    another    with    expense  27. 

and   revenue? 
Name  the  five  special  debits  of  the  Real  28. 

Estate,  account.      (§  132  ^f^  i — 5.)  29. 

Name    the    two    special    credits.      (§  132,  30. 

•Ilf  6,  and  7.) 
What    does    the    difference    of    the    Real  31. 

Estate  account  show?     (§  132.) 
What  does  it  represent  on   the  Financial 

statement?      (§  132.)  32. 

How  is  the  Real  Estate  account  closed? 

(§  132.) 
Define  the  Real  Estate  Expense  and  Rev-  33. 

enue.  account.      (§  133.)  34. 

Name    the    two    special    debits.       (§  133, 

Hi,  112.) 


Name    the    two    special    credits.      (§  133, 

1I1I3    and  4.) 
What  does  the  difference  show?     (§  133.) 
What  does  it  represent  on  the  Profit  and 

Loss  statement?     (§  133.) 
When  is  it  a  profit?    When  a  loss?    (§  133.) 
How  is  it  closed?     (§  133,  ^  6.) 
Define  interest.      (§  134.) 
Define  the  Interest  account.      (§  135.) 
Name   the   three   special   debits.      (§  135, 

HU  1-3.) 

Name  the  three  special   credits.      (§  135, 

Hlf  4-6.) 
What    is   the   difference    between    interest 

and  discount?      (§  134.) 
What  does  the    balance    of    the     Interest 

account  show?     (§  135.) 
What  does  it  represent  on  the  Profit  and 

Loss  statement?      (§  135.) 
When  does  it  show  a  loss?    Again?    (§135.) 
How   is  the  account  closed?     (§  135,  ^  8.) 
Give   the   rule   for  calculating   interest   at 

6  per  cent.     (§  136.) 
Give  the  rule  for  calculating  interest  when 

the  rate  is  more  or  less  than  6  per  cent. 

(§  136.) 
Describe   the   method  of   ascertaining   the 

time    for   which    the    interest    is    to    be 

calculated.     (§  137.) 
What  is  the  face  value  of  a  note?     (§  138.) 
Define  a  compound  journal  entry.    (§  139.) 


§  140.  Trial  Balance,  March  31st.  Since  all  debts  due  the  business  for  property  sold  on  time 
have  been  collected,  and  all  outstanding  obligations  paid,  there  are  no  personal  accounts  on  this  Trial 
Balance.  It  will  be  made  of  all  open  accounts  on  the  ledger,  which  consist  of  W.  H.  Goodwin  Capital, 
Cash  balance  (Cash  book),  Merchandise,  Expense,  Furniture  and  Fixtures,  Real  Estate  Expense  and 
Revenue,  and  Interest.  All  other  accounts  in  the  ledger  should  be  ruled,  and  if  the  student  has 
followed  instructions,  they  will  be.  Use  the  total  of  each  side  of  all  accounts  except  Cash.  Read 
§  66  for  further  information. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  105 


§  141.  Financial  Statement,  March  31st.  As  explained  in  §  79,  the  Financial  statement 
shows  all  the  resources  and  liabilities,  and  the  present  capital.  As  there  is  only  one  resource,  which  is 
the  cash  on  hand,  and  no  liabilities,  it  is  evident  that  the  Cash  balance  represents  W.  H.  Goodwin's 
interest  in  the  business.  The  net  gain  for  March  is  the  difference  between  his  capital  March  ist, 
and  his  present  capital  (the  Cash  balance)-.  Make  this  statement  in  the  same  form  as  shown  in 
illustration  No.  39.  As  there  are  no  liabilities,  write  the  word  "Liabilities,"  in  the  center  and  on 
the  line  below  it  write  "All  Obligations  Paid." 

§  142.  Profit  and  Loss  Statement,  March  31st.  As  explained  in  §  80,  ^  i,  the  Trading 
statement  is  to  be  made  first.  The  total  sales  of  merchandise  is  represented  by  the  credit  side  of 
the  Merchandise  account;  the  cost  is  represented  by  the  inventory  on  hand  at  the  beginning  of  March, 
and  the  merchandise  purchased  during  the  month.  There  being  no  inventory,  the  total  of  these  two 
amounts  (the  debit  side  of  the  Merchandise  account),  equals  the  cost  of  goods  sold.  The  credit  side 
shows  the  returns  from  sales.  The  difference  is  the  gain.  The  Real  Estate  Expense  and  Revenue 
account  shows  a  profit,  because  the  property  sold  for  more  than  it  cost.  The  losses  are  Expense 
Furniture  and  Fixtures,  and  Interest.  The  difference  between  the  three  losses  and  the  two  gains  will 
be  the  net  gain,  which  is  the  same  as  the  difference  between  the  present  capital  at  the  beginning  of 
March,  and  the  cash  on  hand.    See  illustration  No.  40. 

§  143.  Closing  the  Ledger,  March  31st.  As  explained  in  §  85,  closing  the  ledger  is  closing 
all  accounts  used  in  making  the  Profit  and  Loss  statement  and  the  Capital  account.  There  being 
no  inventories,  each  account  on  the  Profit  and  Loss  statement  is  ruled  and  footed,  as  explained 
in  §  87,  ^^  I  and  2.  The  accounts  are  closed  into  the  Profit  and  Loss  account  and  this  is  closed  into 
W.  H.  Goodwin,  Capital.  His  account  is  closed,  and  the  present  capital  brought  down,  as  explained 
in  §  34,  ^10.  After  all  the  accounts  are  closed,  Mr.  Goodwin's  account  will  be  credited  with 
the  same  amount  as  cash  is  debited.  Read  "To  Close,"  in  §§  31 — 34,  122,  132,  133,  135,  and  note 
illustrations  Nos.    4,  5,  6,  7,  36,  44,  and  45. 

§  144.  Proof  Sheet,  March  31st.  It  is  not  necessary  to  take  a  Proof  Sheet  in  this  case,  because 
there  are  only  two  accounts;  one  shows  the  amount  with  which  W.  H.  Goodwin  is  credited,  and  the 
other  the  amount  with  which  Cash  is  debited.  This  is  a  proof  of  the  statement,  that  after  the  ledger 
is  closed,  the  difference  between  the  total  resources  and  liabilities  is  the  same  as  the  present  capital 
oiF  the  investor. 


JOURNAL  ENTRIES  AND'  STATEMENTS. 

EXERCISE  No.  42.  i.  Discounted  at  bank  our  sixty-day  note,  dated  today,  for  $1,000.00, 
rate 8%.    Received  cash  for  proceeds.     (Debit,  §27,  ^2;  §  135,  1[2;  credit,  §  124,  ^3.) 

2.  J.  G.  Miller  prepays  his  note  for  $427.85,  giving  us  his  check  for  $419.37,  the  proceeds. 
(Debit,  §  27,  ^2;  §  135,  is;  Credit,  §  123,  ^j  4.) 

3.  Paid  by  check  our  note  for  $500.00,  due  at  the  bank  today.     (Debit,   §124,   ^  i ;' credit, 

§27,  If  4-) 

4  Drew  thirty-day  draft  on  A.  D.  Appleton  for  $650.00,  and  sent  it  to  Inman  Bros.,  who 
credit  us  with  the  amount,  less  6%  interest  for  thirty  days.  (Debit  the  one  to  whom  the  draft  is 
given,  and  §  135,  ^  3;   credit  the  one  on  whom  it  is  drawn.) 

5.  M.  M.  Newcomer  transfers  to  us  D.  D.  Miller's  note  for  $186.47,  on  account,  which  we 
accept,  less  $3.64  discount.     (Debit,  §  123,  ^2;  credit,  §  29,  T[  5,  and  §  135,  ^6.) 

6.  We  transfer  D.  D.  Miller's  note  (see  No.  5)  to  Arnold  Bros.,  on  an  account  we  owe 
them,  also  give  them  our  note  due  in  sixty  days,  for  $361.27,  in  full  of  account. 


io6  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

7.  We  hold  a  note  (Notes  Receivable)  against  R.  W.  Ritter  for  $256.81,  which  is  not  due,  and 
he  holds  a  note  (Notes  Payable)  for  $500.00  against  us,  which  is  due  today.  We  pay  our  note  by 
giving  him  our  check  for  $250.00  and  his  note,  allowing  him  $6.81  discount  for  prepaying.  (Debit, 
§  124,  t  i;  §  135,  T[3;  Credit,  §27,  I4;  §  123,  ][  6.) 

8.  Day  and  Joiner  owe  us  an  account  of  $892.76.  They  settle  the  same  by  transferring 
A.  Y.  Burrows'  note  for  $269.41,  less  $4.86  discount,  an  account  against  Robert  McFarland  for 
$125.30,  their  check  for  $300.00,  and  their  note  for  the  balance.  (Debit,  §  123,  ^2;  §  29,  ^2;  §  27, 
T[  2;  §  123,  T[  2;  Credit,  §  29,  ^  4  and  H  5;  §  135,  ^  6.) 

9.  Discounted  at  the  bank  M.  D.  Angel's  note  (Notes  Receivable)  for  $1,250.00,  due 
in  ninety  days  from  today,  rate  of  discount  6%.  Received  credit  for  the  proceeds.  (Debit,  §  27, 
H  2 ;  §  135.  If  3 ;  Credit,  §  123,  ^  5.) 

10.  Paid  amount  we  owe  Woodruff  &  Co.,  by  transferring  to  them  A.  D.  Ijam's  note  (Notes 
Receivable),  for  $265.96,  less  $4.28  discount,  our  check  for  $369.86,  and  our  ninety-day  note  for  bal- 
ance, $379.14.     (Debit,  §30,  TI1[  I,  2  and  4;  §  135,  T[ 3;  Credit,   §123,   16;   §124,   I3;   §27,   1  4.) 

11.  John  R.  Hood  began  the  retail  coal  business  with  the  following  resources:  Cash  on  hand, 
$561.25  (§27,  li);  coal  (merchandise)  in  stock  (§31,  1[i),  $681.46;  scales  and  office  fixtures, 
valued  at  $500.00  (§122,  ^i);  account  due  from  A.  D.  Bearden,  $165.20  (§29,  ^i);  account 
due  from  A.  L.  Anderson,  $206.85  (  §  29,  If  i).  He  owes  Jellico  Coal  Co.,  $268.85  (§  30.  If  9);  Coal 
Creek  Coal  Co.,  $187.65  (§  30,  1  9);  note  at  the  bank,  $200.00  (§  124,  1  2). 

NOTE — Debit  the  resources  and  credit  the  liabilities.    The  investor  is  credited  with  the  difference.    Note  references. 

12.  V.  C.  Rawlins  began  the  retail  shoe  business  with  the  following  resources:  Cash 
in  bank,  $1,268.86;  Merchandise  on  hand,  $2,541.90;  accounts  as  follows:  J.  C.  Smith,  $14.86;  W.N. 
Dodson,  $26.40;  John  Whitfield,  $41.80;  Daniel  Cunningham,  $32.55;  David  Wolverton,  $13.90; 
O.  N.  Warson,  $9.45;  C.  E.  ElHot,  $16.45;  a  note  for  $337.65,  with  interest,  signed  by  Robert  Gilbert, 
due  June  i6th;  (§  123,  1  i),  interest  on  same,  $4.65  (§  135);  4  shares  First  National  Bank  stock, 
valued  at  $135.00  per  share.  He  owes  a  note  at  the  bank,  due  July  14th,  for  $1,500.00;  accumulated 
interest  on  the  same,  $36.40  (§  135).  Accoimts  as  follows:  Boston  Shoe  Co.,  $586.91;  Smith  Bros. 
&  Co.,  $291.46;  Davis,  Chumley  Shoe  Co.,  $696.41.  (Debit  First  National  Bank  Stock  for  the 
value  of  stock  invested.) 

13.  Davis  &  Co.  owe  Arnot,  Mahew  &  Co.  an  account  of  $946.95,  which  is  due. 
They  wish  to  settle  the  same  by  a  sixty-day  draft  on  C.  W.  Hayden,  who  owes  them  $1,286.41.  Arnot, 
Mahew  &  Co.  agree  to  accept  the  draft  in  settlement  of  the  account,  provided  it  is  drawn  for  a  sufficient 
amount  that  when  discounted  at  the  bank  at  6% ,  the  proceeds  will  equal  the  amount  of  the  account. 
Davis  &  Co.  instruct  their  bookkeeper  to  draw  the  draft  on  C.  W.  Hayden  for  a  sufficient  amount  that 
when  discounted  at  the  bank  at  6%  for  sixty  days,  the  proceeds  will  equal  $946.95,  and  to  send  this 
draft  to  Arnot,  Mahew  &  Co.,  who  will  present  it  to  C.  W.  Hayden  for  acceptance. 

To  ascertain  the  amount  of  the  draft,  calculate  the  interest  on  one  dollar  for  sixty  days,  deduct 
this  from  one  dollar,  and  divide  $946.95  by  this  amount.  Make  the  entry  that  the  bookkeeper  for 
each  of  the  three  parties  would  make  on  his  books. 

Davis  &  Co.  would  debit  the  person  to  whom  the  draft  was  sent  for  the  amount  they  owed,  and 
Interest  for  the  interest  on  this  for  sixty  days;  they  would  credit  the  party  on  whom  the  draft  is  drawn. 

Arnot,  Mahew  &  Co.  would  debit  Notes  Receivable  for  the  face  of  the  draft,  and  credit  the  person 
from  whom  they  received  the  draft,  and  Interest. 

C.  W.  Hayden  would  debit  the  firm  who  drew  the  draft  on  him  and  credit  §  124,  ^  4. 

14.  The  following  are  the  facts  used  by  Oscar  Dunn,  the  bookkeeper  for  M.  A.  Dance, 
in  making  the  statements  of  the  business  July  31st:  Trial  Balance.  M.  A.  Dance,  Capital,*  Dr.  $621.35, 
Cr.  $5,000.00;  Cash,  Dr.  $1,491.78;  Mdse.,  Dr.  $7,681.42,  Cr.  $7,041.32;  (The  debit  side  repre- 
sents the  inventory  January  ist,  $2,462.97,  and  purchases  for  the  fiscal  period,  $5,218.45).  Expense, 
Dr.  $837.65;  Furniture  and  Fixtures,  Dr.  $681.93;  Interest,  Dr.  $37.42,  Cr.  $9.65;  Real  Estate, 
Dr.  $950.50;    Real  Estate  Expense  and  Revenue,  Dr.    $36.41,    Cr.  $152.90;  Notes    Receivable,  Dr. 


20TH  CENTURY-BOOKKEEPING  AND  ACCOUNTING.  107 


$296.48;  Notes  Payable,  Cr.  $500.00;  Union  Match  Co.,  Cr.  $87.65;  Davis  Bros.  &  Co.,  Cr.  $121.65; 
Donaldson,  Bros.,  Cr.  $65.82;  J.  L.  Martin,  Dr.  $114.96;  C.  F.  Dobson,  Dr.  $62.81 ;  Johnson  Bros., 
Cr.    $87.96;     Daniel  Foust,  Dr.    $108.13;    T.  J.  Phillips,  Dr.    $146.11. 

INVENTORIES.     Merchandise,  $2,756.75;  Furniture  and  Fixtures,  $625.00. 

Make  the  Financial,  and  Profit  and  Loss  statements.  Read  §  79,  T[  1[  i — 4,  and  §  80,  ^^  i — 5.  See 
illustrations  Nos.  39  and  40. 

15.  We  owe  a  note  at  the  bank  which  is  due,  amount  $5,000.00.  In  payment  of  same, 
we  transfer  Oliver  Bros.'  note  (Notes  Receivable)  for  $1,687.95,  less  39  days  discount,  at  6% ; 
our  note  due  in  ninety  days,  for  $3,000.00,  less  6%  discount;  and  our  check  for  the  balance.  (Debit, 
§  124,  H  i;  §  135.  Us;  Credit,  §  123,  ^6;  §  124,  13,  and  §27,  1  4.) 

16.  Condon  Bros,  owe  Crim  &  Johnson  $1,965.85.  D.  L.  Admire  owes  Condon  Bros. 
$2,500.00.  Condon  Bros,  draw  a  ten-day  draft  on  D.  L.  Admire,  in  favor  of  Crim  &  Johnson, 
for  the  amount  ($1,965.85)  they  owe  Crim  &  Johnson,  and  send  the  draft  to  Crim  &  Johnson,  who 
have  it  accepted  by  D.  L.  Admire.  Make  the  journal  entry  each  would  make.  See  note  under  No. 
13.    The  entries  are  the  same,  except  there  is  no  interest. 

17.  Owens  &  Co.  owe  Simpson  &  Son,  on  account,  $3,687.47.  They  pay  this  by  transferring 
O.  A.  McDonald's  note  (Notes  Receivable)  for  $850.00,  less  67  days  interest  at  6% ;  give  their  note 
for  $1,000.00,  due  in  30  days,  no  discount,  and  their  check  for  the  balance. 

Make  the  journal  entry  for  both  Owens  &  Co.  and  Simpson  &  Son. 

18.  D.  owes  E  $721.65.  F  owes  D  an  amount  greater  than  this.  D  draws  at  sight  on  F 
for  $721.65,  and  sends  the  draft  to  E.  E  presents  the  draft  to  F,  who  pays  it  by  taking  a  receipt 
from  E  for  $375.87,  E  owing  him  this  amount,  and  giving  E  a  check  for  the  balance. 

Make  the  entry  for  D,  E  and  F.  The  student  will  note  that  D  has  nothing  to  do  with  the  trans- 
action between  E  and  F,  as  the  settlement  is  satisfactory  with  E. 

19.  R.  L.  Young,  a  retail  dry  goods  merchant,  makes  a  statement  of  his  business  July 
1st,  which  is  as  follows:  RESOURCES:  Cash  in  bank,  $561.27;  Merchandise,  per  inven- 
tory, $3,268.97;  Notes  Receivable  (Notes  on  hand),  $397.65;  Notes  Payable  (Notes  due  the  bank), 
$3,000.00;  Furniture  and  Fixtures  (show  cases,  shelving,  etc.,  on  hand),  $600.00;  Accounts  Payable 
(due  wholesale  merchants),  $2,961.27;  Accounts  Receivable  (due  from  customers),  $2,461.25.  He 
sells  the  business  to  N.  C.  McFall,  at  the  full  value,  as  shown  by  the  statement.  Mr.  McFall  wishes 
to  open  new  books  and  keep  them  by  double  entry.  As  he  does  not  buy  the  cash,  he  decides  to  put 
in  $1,000.00,  which  amount  is  deposited  to  his  credit  in  the  bank.     Make  the  opening  entry. 

NOTE — Debit  cash  for  $1000.00  and  all  the  other  resources  for  their  fafe  value.  Credit  all  the  liabilities  and  Mr. 
McFall  for  the  difference  between  the  resources  and  liabilities. 

20.  R.  C.  Bookmeyer,  bookkeeper  for  M.  H.  Lockyear,  makes  a  statement  of  the  business 
December  31st.  The  following  are  the  facts  used:  TRIAL  BALANCE:  M.  H.  Lockyear,  Capital, 
Dr.  $350.00,  Cr.  $5,000.00;  Cash,  Dr.  $2,986.41;  Mdse.,  Dr.  $6,123.15.  Cr.  $6,230.54;  (The  debit 
side  of  the  Merchandise  account  represents  the  inventory  at  the  beginning  of  the  fiscal  period,  $2,103.10, 
and  the  purchases  for  the  period,  $4,020.05.)  Oak  Street  Property,  Dr.  $1,600.00;  Oak  Street  Property 
Expense  and  Revenue,  Dr.  $81.96,  Cr.  $481.95;  Expense,  Dr.  $729.65;  Furniture  and  Fixtures, 
Dr.  $841.32;  Notes  Receivable,  Dr.  $918.35;  Notes  Payable,  Cr.  $1,918.35.  As  he  does  a  cash  busi- 
ness, there  are  no  Personal  accounts.  INVENTORIES:  Merchandise,  $2,225.50;  Furniture  and  Fix- 
tures, $800.00. 

Make  the  Financial,  and  Profit  and  Loss  statements;  transfer  the  accounts,  as  shown  on  the 
Trial  Balance,  to  the  ledger,  and  close  the  ledger,  using  the  Profit  and  Loss  statement  as  a  guide. 
Take  a  Proof  Sheet  to  ascertain  if  the  ledger  is  closed  correctly.  Read  §  79,  H  i — ^3;  §  80,  H  i — 5; 
§§  86 — 90.    See  illustrations  Nos.  39,  40  and  41. 


io8 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


GENERAL  REVIEW  QUESTIONS. 


2. 


3- 


7- 


10. 


II. 


12. 


What  book  of  original  entry  was  used  in  13 

January? 
What   two    new    books   of   original    entry  14 

were  introduced  in  February? 
What    one    book    of    original    entry    was  15 

introduced   in   March?  16 

What  one  book  of  complete  entry  has  been 

used  in  January,  February  and  March?  17 

Why  is  the  ledger  designated  as  a  book  of 

complete  entry?  18 

When  transactions  are  being  recorded  in  19 

the  purchases  book,  sales  book,  journal 

and   cash   book    what   is   the   order  of  20 

posting?  21 

What  account  in  the  ledger  is  debited  for 

the  total  of  the  purchases  book?  22. 

What  account  in  the  ledger  is  credited  for 

the  total  of  the  sales  book? 
Is  it  necessary  to  keep  a  Cash  account  in  23. 

the  ledger  when  the  cash  book  is  kept?  24. 

Can  you  give  any  good  reason  why  a  Cash  25. 

account  should  be  kept  under  the  con-  26. 

ditions  mentioned  in  No.  9? 
When   one  Cash   account  is  kept   in   the 

ledger  are  the  totals  of  the  debit  and  27. 

credit  sides  of  the  cash  book  posted?  28. 

Name  some  of  the  advantages  of  the  sales  29. 

book.  30. 


Name  some  of  the  advantages  of  the  pur- 
chases book. 

Name  some  of  the  advantages  of  the  cash 
book. 

Describe  the  method  of  provjng  cash. 

How  does  the  bookkeeper  know  that  his 
cash  is  in  balance? 

Describe  the  method  of  depositing  money 
in  the  bank. 

Describe  the  method  of  writing  a  check. 

Describe  the  method  of  keeping  an  ac- 
count with  the  bank. 

Name  three  kinds  of  endorsements. 

When  a  part  payment  is  made  on  a  note, 
how  is  it  shown? 

Why  is  it  better  to  write  a  receipt  on  the 
back  of  the  note  than  to  give  the  payer 
a  receipt  for  the  payment? 

Define  the  Financial  statement. 

Define  the  Profit  and  Loss  statement. 

Define  the  Trading  statement. 

How  does  the  bookkeeper  know  that  the 
facts  shown  by  these  three  statements 
are  correct? 

When  is  the  ledger  closed? 

Define  "Current  Fiscal  Period." 

How  often  is  the  ledger  closed? 

What  is  the  object  of  the  Proof  Sheet? 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  icx) 


PART  I. 


RETAIL  GROCERY  BUSINESS. 

Before  recording  any  of  the  transactions  given  below,  the  student  should  follow  directions  given 
on  the  direction  card  enclosed  with  the  blank  books.  When  these  instructions  are  completed,  he  should 
write  his  name  on  the  outside  of  the  front  cover  of  the  blank  books  and  page  each. 

MEMORANDUM  OF  TRANSACTIONS  FOR  JANUARY. 

I.  TRANSACTION.  W.  H.  Goodwin  invested  $2,000.00  in  the  retail  grocery  business.  You 
are  employed  as  bookkeeper  at  a  salary  of  $25.00  per  month.  You  are  to  make  a  record  of  each  trans- 
action. From  this  record  you  must  be  able  to  determine  who  owes  Mr.  Goodwin,  whom  he  owes, 
the  amount  of  merchandise  bought  and  sold,  the  cash  received  and  paid  out,  and  the  running  expenses 
of  the  business. 

ENTRY.  You  are  now  ready  to  make  the  entry  in  the  journal  for  the  transaction  just  mentioned,  the  investment 
of  your  employer. 

Proceed  as  follows: 

1st.  Open  your  journal  at  the  first  page,  and  write  on  the  blue  line  above  the  heavy  line,  "the  name  of  the  city  in 
which  your  school  is  located,  and  Jan.  i,  191.  .  ."     See  illustration  No.  13. 

2d  On  the  first  blue  line  beneath  the  heavy  line,  beginning  at  the  vertical  red  line  at  the  left,  write  the  word  "Cash" 
(§  27,  ^2),  and  on  the  same  line,    in    the    first    money  column,  write   "2,000,"   which   is  the  amount  .of  money  invested. 

3d.  On  the  next  blue  line,  beginning  at  the  vertical  blue  line  on  the  left,  write  "W.  H.  Goodwin,  Capital,"  (§  34, 
If  5).  and  in  the  second  money  column  write   "2,000,"    the  amount  with  which  Mr.  Goodwin  is  credited. 

4th.  On  the  next  blue  line,  beginning  at  the  left,  write  an  explanation  of  the  entry,  which  should  be,  "Investment 
at  the  beginning  of  the  business." 

This  completes  the  entry  for  the  first  transaction,  which  is  the  investment  of  the  proprietor.  See  first  entry  in  illus- 
tration No.    13. 

There  are  four  steps  necessary  to  enter  a  transaction:  ist,  the  date;  2d,  the  name  of  the  account  which  represents 
the  property  received,  the  service  rendered,  or  the  person  who  receives  something  and  the  amount;  3d,  the  property  given 
in  exchange  for  the  service,  or  the  person  who  gave  the  property  to  the  business,  and  the  amount-  4th,  an  explanation  of 
the  entry,  so  that  the  auditor  will  understand  why  the  accounts  mentioned  are  debited  and  credited.  The  latter  is 
very  important,  because  every  bookkeeper  should  keep  his  books  so  that  they  could  be  intelligently  audited,  and  the 
more  explicit  he  makes  his  explanations,  the  easier  it  is  for  the  auditor  to  determine  the  correctness  of  his  work. 

QUESTIONS.     What  account  is  debited?     (§  27,  1  2.)     Credited?     (§  34,  1  5.) 

TO  THE  STUDENT.  Illustrations  are  given  in  the  text  for  all  the  work  at  the  beginning;  these  show  the  correct 
form  of  the  transaction  or  account.  You  are  expected  to  refer  to  these  when  necessary,  but  do  not  copy  them;  it  will  do 
you  no  good  and  cause  you  trouble  when  you  have  work  that  is  not  illustrated.  Each  illustration  is  numbered  in  consecu- 
tive numbers,  beginning  with  No.  i.  These  illustrations  are  referred  to  by  numbers,  and  not  the  page  in  the  text,  unless 
specially  mentioned. 

In  the  same  way  all  of  the  important  information  in  the  text  is  described  by  sections  (designated  by  the  symbol  §  ), 
each  of  which  is  numbered.  When  reference  is  given,  it  is  to  the  section  number  and  not  the  page  number.  If  a  section 
(§)  cor^tains  several  important  paragraphs  (If),  reference  is  made  to  the  section  (§)  number  and  paragraph  (If)  number. 
Thus,  §  29,  ^  6,  refers  to  an  important  credit  described  in  section  29,  paragraph  6. 


no  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

21  TRANSACTION.  Bought  of  Borches  &  Co.,  on  account,  merchandise  per  invoice  of  this 
date,  $77-30. 

ENTRY.  There  are  four  steps  necessary:  1st,  the  date,  which  is  written  on  the  next  vacant  blue  line  in  the  center 
of  thtf  page;  2d,  the  name  of  the  account  debited  (§  31,  t  2),  which  is  written  at  the  left  on  the  blue  line  below  the  date, 
and  the  amount,  which  is  written  in  the  first  (debit)  money  column  on  the  same  line;  3d,  the  name  of  the  account  credited 
(§  30,  ^  10),  which  is  written  on  the  next  blue  line  below,  beginning  at  the  vertical  blue  line  at  the  left,  and  the  amount, 
which  is  written  on  the  same  line  and  in  the  second  (credit)  money  column;  4th,  the  explanation  of  the  entry,  which  is 
the  information  for  the  auditor  or  any  person  who  may  wish  to  verify  the  correctness  of  your  bookkeeping.  The  second 
entry  in  illustration  No.  13  shows  the  above  entry  as  it  should  appear  in  your  journal. 

QUESTIONS.     What  account  is  debited?     (§  31,  f  2.)     Credited?     (§  30,  •[  10.) 

What  is  the  rule  for  determining  the  accounts  debited  and  credited  when  property  is  purchased  on  time?     (§  42.) 

3.  TRANSACTION.  Bought  of  Kaiser  Bros.,  on  account,  merchandise  per  invoice  received 
this  date,  $134.95. 

ENTRY.  This  entry  is  the  same  as  the  one  you  made  for  the  transaction  of  Jan.  2,  with  the  exception  of  the  name 
of  the  person  and  the  amoimt.     See  preceding  instructions. 

QUESTIONS.     What  account  is  debited?     (§  31,  f  2.)     What  account  is  credited?     (§  30,  1  10.)     Why?     (§  42.) 

4.  TRANSACTION.     Paid  $20.00  cash,  city  and  state  Hcense  for  one  year. 

ENTRY  Read  Rule  6  (§  46),  then  make  the  entry  in  your  journal  exactly  as  the  entry  for  Jan.  4,  illustration  No. 
13.    Always  make  the  entry  without  referring  to  the  illustration  if  you  can,  but  be  sure  you  understand  the  transaction. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  14.)  What  account  is  debited?  (§  32,  f  i.) 
What  account  is  credited?  (§  27,  ^  3.)  What  is  the  rule  for  determining  the  accounts  affected  when  the  transaction  involves 
an  exchange  of  property  for  services?  (§  46.)  Have  you  as  much  cash  on  hand  now  as  you  had  before  this  transaction 
was  made?    What  have  you  to  show  for  it?    What  is  license?    (§  58.) 

TRANSACTION.  Sold  A.  R.  Jennings,  on  account,  11  lbs.  Arbuckle  Coffee  at  20c;  50  lbs. 
Granulated  Sugar  at  6c;  25  lbs.  Brown  Sugar  at  5c;  60  lbs.  Bacon  at  13c. 

When  the  date  is  not  given,  it  is  the  same  as  that  above. 

ENTRY.  Read  rule  3  (§  43).  then  make  the  entry  in  your  journal  exactly  like  the  fifth  entry  in  illustration  No.  13. 
Note  very  carefully  the  method  of  recording  this  class  of  transactions,  that  you  may  make  those  which  follow  without  re- 
ferring to  the  illustration. 

QUESTIONS.  What  account  is  debited?  (§  29,  t  2.)  What  account  is  credited?  (§  31,  ^  5.)  When  the  trans- 
action involves  the  exchange  of  property  for  credit,  what  is  the  rule  for  determining  the  accounts  to  be  debited  or  credited? 
(Rule  3,  §  43.)  Have  you  as  much  merchandise  now  as  you  had  before  the  transaction  was  made?  What  have  you  to  show 
for  the  value  of  the  goods  sold?    When  may  we  demand  payment  for  the  amount  Mr.  Jennings  owes  us?     (§  57). 

5.  TRANSACTION.  Bought  of  J.  Allen  Smith  &  Co.,  for  cash,  flour  per  invoice  of  this  date, 
$192.00. 

ENTRY.     Read  rule  i  (§  41),  then  enter  in  your  journal  exactly  like  the  sixth  entrj^  in  illustration  No.  13. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  9.)  What  account  is  debited?  (§  31,  ^  2.) 
What  account  is  credited?  (§  27,  1  3.)  When  property  (cash)  is  exchanged  for  property  (merchandise),  what  is  the  rule 
for  determining  the  accounts  debited  and  credited?    (Rule  i,  §  41.) 

6.  TRANSACTION.     Received  $30.00  for  sundry  cash  sales  to  date. 

ENTRY.     Read  rule  i  (§  41),  then  enter  in  your  journal  the  same  as  the  last  entry  in  illustration  No.  13. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  9.)  What  is  the  rule  for  determining  the  ac- 
counts to  be  debited  and  credited?  (Rule  i,  §  41.)  What  account  is  debited?  (§  27,  ^  2.)  Credited?  (§  31,  t  5.)  Dis- 
tinguish between  this  transaction  and  the  one  immediately  preceding  it.  Was  anything  made  by  this  transaction?  If 
so,  do  the  books  show  it? 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  in 

TRANSACTION.     Paid  Borches  &  Co.  $77.30  in  full  of  account. 

ENTRY.     Read  rule  4  (§  44),  then  enter  in  your  journal  the  same  as  the  first  entry  in  illustration  No.  14. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  12.)  When  we  pay  others  money  we  owe  them, 
what  rule  is  used  to  determine  the  accounts  debited  and  credited?  (Rule  4,  §  44.)  Has  the  value  of  the  property  of  the 
business  increased  by  the  transaction?  Why?  Are  you  satisfied  with  your  progress,  and  do  you  think  you  understand 
the  work  well  enough  to  proceed? 

8.  TRANSACTION.  Sold  the  Central  Hotel,  on  account,  5  brls.  Roller  King  Flour  at  $5.10; 
3  brls.  White  Lily  at  $6.25;  3  Hams,  45  lbs.,  at  13c;  100  lbs.  Granulated  Sugar  at  6c;  25  scks.  salt  at  5c. 

ENTRY.     Read  rule  3  (§  43),  and  make  the  entry  in  your  journal  the  same  as  the  second  entry  in  illustration  No.  14. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  1 1 .)  What  is  the  rule  for  determining  the  accounts 
to  be  debited  and  credited?  (Rule  3,  §  43.)  Why  is  the  Central  Hotel  debited?  ( §§  29.  ^f  2.)  Why  is  Merchandise  credited? 
(§  3i«  If  5-)  Did  Mr.  Goodwin  make  anything  by  this  transaction?  Is  it  shown  on  the  books?  How?  What  have  you 
learned  from  this  transaction? 

9.  TRANSACTION.  Received  $10.00  from  A.  R.  Jennings  to  apply  as  part  payment  of  the 
amount  he  owes  us. 

ENTRY.     Read  rule  5  (§  45),  then  make  the  entry  in  your  journal  the  same  as  the  third  entry  in  illustration  No.  14, 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  13  )  Why  is  Cash  debited?  (§  27,  T[  2.)  Why 
is  Mr.  Jennings  credited?  (§  29,  ^  4.)  When  a  customer  pays  a  part  or  all  he  owes,  what  is  the  rule  for  determining  the 
accounts  to  be  debited  and  credited?     (§  45.) 

10.  TRANSACTION.  Bought 'of  Hazen  &  Lotspeich,  on  account,  merchandise  per  invoice  of 
this  date,  $228.60. 

ENTRY.     Read  rule  2,  (§  42),  then  make  the  entry  in  your  journal  the'same  as  the  fourth  entry  in  illustration  No.  14. 

QUESTIONS.  What  is  the  rule  for  determining  the  accounts  debited  and  credited?  (Rule  2,  §  42.)  What  account 
is  debited?    (§  31,  1  2.)    What  account  is  credited?    (§  30,  ^  lO-) 

11.  TRANSACTION.  Sold  A.  R.  Jennings,  on  account,  6  doz.  canned  Peaches  at  $1.35;  5 
doz.  canned  Tomatoes  at  $1.10;  3  cans,  155  lbs..  Lard,  at  13c;  2  brls.  White  Lily  Flour  at  $6.25;  61K 
lbs.  Bacon  at  13c. 

ENTRY.  Be  sure  yout  calculations  are  correct,  then  enter  in  your  journal  the  same  as  the  fifth  entry  in  illustration 
No.  14. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  11.)  What  account  is  debited?  (§  29,  t  2.) 
What  account  is  credited?    (§  31,  ^  5.)    What  is  the  rule  for  determining  the  debits  and  credits?    (Rule  3,  §  43.) 

12.  TRANSACTION.  Received  from  the  Central  Hotel  $30.00,  in  part  payment  of  the  bill 
sold  them  on  the  8th. 

ENTRY.     Note  sixth  entry  in  illustration  No.  14  for  form,  and  enter  as  instructed  in  rule  5,  §  45. 

QUESTIONS.     Apply  the  questions  given  on  Jan.  9th,  as  that  transaction  is  of  the  same  nature. 

13.  TRANSACTION.     Received  $40.00  for  sundry  cash  sales  to  date. 

ENTRY.     This  entry  is  similar  to  the  first  on  Jan.  6th,  except  the  amount,  and  should  be  entered  the  same. 

QUESTIONS.  To  which  class  of  transactions  does  this  belong?  (§  9.)  What  is  the  rule  for  determining  the  ac- 
counts to  be  debited  and  credited  when  one  kind  of  property  is  exchanged  for  another?  (Rule  i,  §  41.)  What  account  is 
debited?     (§  27,  ^  2.)     What  account  is  credited?     (§  31,  11  5.) 

TRANSACTION.     Paid  Kaiser  Bros.  $100.00  on  account. 


112  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


ENTRY.     This  transaction  is  of  the  same  nature  as  the  second  one  of  Jan.  6th.     The  entry  is  the  same. 

QUESTIONS.  When  money  is  paid  our  creditors  to  apply  on  account,  what  is  the  rule  for  determining  the  ac- 
counts affected?     (Rule  4,   §  44.)     Why  is  Kaiser  Bros.'  account  debited?  (§  30,  ^  i.)    Why  is  Cash  credited?     (§  27,  *(\  3.) 

TRANSACTION.  Sold  M.  A.  Johnson,  on  account,  3  brls.  Roller  King  at  $5.10;  3  brls.  White 
Lily  at  $6.25;  i  can  Lard,  50  lbs.,  at  13c;  4  Hams,  79  lbs.,  at  15c. 

ENTRY.  This  is  the  fourth  transaction  of  this  kind,  and  you  should  understand  what  to  do  and  how  to  do  it  with- 
out further  reference;     but  in  case  you  do  not,  do  not  be  ashamed  to  own  it. 

QUESTIONS.     Apply  the  questions  and  read  the  references  given  in  the  mstructions  of  Jan.  4th. 

TO  THE  STUDENT.  If  Mr.  Goodwin  should  ask  you  for  the  amount  due  from  any  one  of  the  customers  or  the 
history  of  any  account,  you  would  have  to  go  over  all  of  the  transactions  recorded  in  the  iournal  to  answer  his  question. 
To  answer  this  question  readily,  it  is  necessary  to  transfer  (post)  all  of  the  amounts  in  the  journal  to  the  debit  or  credit 
side  of  the  accounts  in  the  ledger.  Before  posting,  it  might  be  well  to  make  a  list  of  the  four  sales  which  you  have  recorded 
in  your  journal,  showing  the  name  of  the  person  to  whom  the  sale  was  made,  the  amount  and  also  the  total  of  the  four 
sales.     Have  this  approved  by  the  teacher.     When  this  has  been  done,  you  are  ready  to  begin  th";  posting. 

Preparatory  to  doing  this,  open  accounts  in  the  ledger  as  follows: 

At  the  top  of  page  i  write,  "W.  H.  Goodwin,  Capital;"  at  the  top  ot  page  2,  "Cash;"  at  the  top  of  page  3,  "Mer- 
chandise;" at  the  top  of  page  4,  "Expense;"  in  the  middle  of  page  4,  "Profit  and  Loss."  Divide  page  5  into  three  equal 
parts  and  draw  a  red  line  on  the  blue  line  which  is  one-third  the  distance  from  the  top,  and  on  the  blue  line  which  is  one- 
third  the  distance  from  the  bottom.  Draw  these  lines  all  the  way  across  the  page,  and  on  the  horizontal  blue  line.  Illus- 
tration No.  16  shows  the  form,  but  you  will  have  more  space  between  the  red  lines.  At  the  top  of  page  5  write  "Borches 
&  Co.";  on  the  first  red  line,  which  is  one-third  the  distance  from  the  top,  "Kaiser  Bros.;"  on  the  next  red  line,  "A.  R. 
Jennings."  Divide  page  6  in  the  same  manner,  and  at  the  top  write  "Central  Hotel;"  on  the  first  red  line,  "Hazen  & 
Lotspeich;"  on  the  second  red  line,  "M.  A.  Johnson."  Write  the  na.me  of  the  account  so  that  the  beginning  and  the  end 
will  be  the  same  distance  from  the  left  and  right  sides  of  the  page.  Those  written  at  the  top  of  the  page  must  be  placed 
on  the  light  blue  line;  the  others  on  the  page  on  the  red  lines  as  instructed.    See  illustrations  Nos.  15  and  16. 

You  are  now  ready  to  post  the  various  items  from  the  journal  to  the  ledger.  You  will  find  detailed  mstructions  for 
doing  this  in  §§  60  and  61.  Ifyou  can  not  understand  the  explanation,  get  your  teacher  to  explain  them.  When  you  rule 
accounts,  follow  instructions  in  §  62.  Prove  cash  as  instructed  in  §  64.  Your  Cash  account  should  be  the  same  as  that 
in  illustration  No.   15. 

When  you  have  completed  posting,  present  your  books  to  the  teacher  for  approval.  After  the  teacher  has  approved 
them,  proceed  with  recording  the  transactions. 

15.  Bought  of  Borches  &  Co.,  on  account,  merchandise  per  invoice  of  this  date,  $246.00. 
Enter  in  the  journal,  using  the  other  entries  of  the  same  nature  as  models.    Apply  rule  2,  §  42. 

16.  Sold  Imperial  Hotel,  on  account,  8  Shoulders,  184  lbs.,  at  loc;  3  cans  Lard,  160  lbs.,  at 
13c;  4  doz.  canned  Peaches  at  $1.35;  4  doz.  canned  Blackberries  at  $1.20. 

Read  rule  3  (§  43),  and  enter  in  your  journal;  use  same  form  as  in  other  transactions  of  this  nature  (illustrations 
13  and  14).  Be  sure  your  calculations  are  correct.  If  this  explanation  is  not  clear  enough,  apply  to  your  teacher  for  addi- 
tional help. 

Apply  questions  and  read  references  given  in  the  instructions  of  the  second  entry  for  January  4th. 

17.  Bought  of  Lake  View  Creamery,  on  twenty  days'  time,  merchandise  per  invoice  of  Jan. 
14th,  $28.00. 

Determine  from  rule  2  (§  42),  the  accounts  affected  and  enter  the  transaction  in  your  journal,  using  previous  entries 
of  the  same  nature  as  models.     In  the  explanation  column  write  "20  days"  instead  of  "on  account." 

You  have  had  a  number  of  transactions  of  this  nature  and  should  experience  little  trouble  in  making  a  record  of  them 
hereafter. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  113 

18.  Received  of  M.  A.  Johnson,  $35.00  to  apply  on  account. 

Read  rule  5  (§  45),  and  enter  in  the  journal;  use  the  same  form  as  in  other  transactions  of  this  nature  (illustrations 
13  and  14). 

Be  sure  that  the  information  given  is  sufficient  for  the  auditor.  Make  it  as  brief  as  possible,  but  do  not  let  brevity 
interfere  with  clearness.  The  successful  bookkeeper  recognizes  the  importance  of  a  thorough  explanation.  Those  given 
in  the  transactions  recorded  in  illustrations  Nos.  13  and  14  are  sufficient.    See  that  your  explanations  correspond  with  these. 

19.  Sold  A.  C.  Williams,  on  account,  3  brls.  Roller  King  at  $5.10;  2  brls.  White  Lily  at 
$6.25;  10  lbs.  Creamery  Butter  at  35c;  5  bu.  Meal  at  6oc;  4  bu.  Beans  at  $2.00. 

Read  rule  3  (§  43),  and  enter  in  your  journal;  use  the  same  form  as  in  other  transactions  of  this  nature. 

20.  Paid  Kaiser  Bros,  the  balance  due  them. 

Refer  to  Kaiser  Bros.'  account  in  the  ledger  to  ascertain  the  correct  amount.  Read  rule  4  (§  44),  and  enter  in  the 
journal;  use  the  same  form  as  in  other  transactions  of  this  nature. 

21.  Received  $50.00  for  sundry  cash  sales  to  date. 

Read  rule  i  (§  41),  and  enter  in  the  journal;  use  the  same  form  as  in  other  transactions  of  this  nature. 

22.  Sold  R.  G.  Mathews,  on  account,  5  doz.  canned  Peaches  at  $1.35;  i  doz.  canned  Black- 
berries, $1.20;  4  doz,  canned  Tomatoes  at  $1.10;  i  brl.  Roller  King,  $5.40;  3  bu.  Beans  at  $2,10, 

Enter  the  transaction  in  the  journal  as  usual.  Be  sure  your  calculations  are  correct  before  entering,  and  thus  avoid 
having  to  correct  errors. 

When  in  doubt  as  to  the  accounts  affected  by  a  transaction,  refer  to  the  rules,  some  of  which  are  sure  to  cover  the 
case.    Consult  your  teacher  regarding  points  not  made  clear. 

23.  Bought  of  J,  Allen  Smith  &  Co.,  at  10  days,  merchandise  per  invoice  of  this  date,  $197.10, 

TO  THE  STUDENT,  Do  you  understand  the  work  you  are  going  over?  If  not,  do  not  hesitate  to  ask  for  expla- 
nation from  your  teacher.  Are  your  books  neat  in  appearance  and  correct  in  form?  Are  you  keeping  a  blotter  under 
your  hand,  as  instructed? 

24.  Received  $15.00  from  the  Central   Hotel,    in   part   payment   of   their  account. 
Paid  Hazen  &  Lotspeich  $125.00  on  the  account  we  owe  them. 

25.  Sold  Imperial  Hotel,  on  account,  5  brls.  White  Lily  at  $6.60;  5  brls.  Roller  King  at 
$5.25;  4  cans  Lard,  160  lbs.,  at  13c. 

While  the  references  are  not  given  in  every  case,  it  is  presumed  that  you  will  look  them  up  when  in  doubt  about  an 
entry, 

26.  Received  $4.25  from  A.  R,  Jennings  in  full  of  balance  due  on  bill  sold  him  Jan,  4th, 

Sold  C,  L.  Loyd,  on  account,  25  lbs.  Arbuckle  Coffee  at  20c;  50  lbs.  Red  X  Soap  at  4c;  100 
lbs.  Granulated  Sugar  at  6c;  50  lbs.  Brown  Sugar  at  5c;  4  brls.  White  Lily  at  $6.50;  3000  lbs.  Bran  at 
$11,25,  per  1000  lbs;  5  bu.  Meal  at  60c. 

When  the  price  is  per  thousand  pounds  and  expressed  in  dollars  and  cents,  multiply  the  quantity  by  the  price  and 
point  off  five  places  in  the  product;  if  the  price  is  expressed  in  dollars  only,  point  off  three  places, 

27.  Sold  J.  C.  Wilson,  on  account,  1000  lbs.  Bran,  $11.25;  25  lbs.  Red  X  Soap  at  4c;  i  doz. 
canned  Peaches,  $1.35;  4  Shoulders,  85  lbs.,  at  loc;  3  cans  Lard    155  lbs.,  at  13c. 


114  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

Received  $42.50  for  sundry  cash  sales  to  date. 

Bought  of  Donaldson  Bros.,  on  account,  merchandise  per  invoice  of  Jan.  24,  $172.75. 

29.  Received  $50.00  from  C.  L.  Loyd  in  part   payment  of   the  amount  he  owes  us. 

30.  Paid  Borches  &  Co.  $150.00  to  apply  on  amount  we  owe  them. 

31.  Paid  bookkeeper's  salary  $25.00,  and  rent  $35.00. 

Read  rule  6  (§  46),  and  enter  in  your  journal;  see  first  transaction  of  Jan.  4th. 

Report  the  sales  to  ^ouc  teacher,  as  instructed  Jan.  13th,  and  present  this,  together  with  your  journal,  for  approval. 
After  they  have  been  approved,  follow  the  instructions  given  below. 

INSTRUCTIONS. 

1st.  Open  accounts  in  your  ledger  as  follows:  Divide  page  7  into  three  equal  parts,  by  drawing  a  red  line  on  the 
blue  line,  one-third  the  distance  from  the  top,  and  on  the  line  one-third  the  distance  from  the  bottom.  Draw  these  lines 
all  the  way  across.  At  the  top  of  page  7  write  "Imperial  Hotel;"  on  the  first  red  line,  "Lake  View  Creamery;"  on  the 
second  red  line,  "A.  C.  Williams."  Rule  page  8  in  the  same  manner  and  at  the  top  write  "R.  G.  Mathews;"  on  the  first 
red  line,  "J.  Allen  Smith  &  Co.";  on  the  second  red  line,  "C.  L.  Loyd."  Rule  page  9  in  the  same  manner,  and  at  the  top, 
write  "J.  C.  Wilson;"  on  the  first  red  line,  "Donaldson  Bros." 

2d.  Post  all  of  the  items  in  the  journal  as  instructed  in  §§  60  and  61.  Be  sure  to  rule  the  personal  accounts  that 
balance,  as  instructed.    See  first  account  in  illustration  No.  16. 

Special  terms  are  written  in  the  explanation  column  in  the  ledger.  This  refers  to  the  number  of  days  allowed  for 
payment  of  an  invoice. 

3d.     Check  the  posting  for  the  entire  month  of  January  as  instructed  in  §  65. 

4th.  Prove  cash  as  instructed  in  §  64.  The  difference  between  the  two  sides  of  the  Cash  account  should  be  $1,547.50; 
this  is  the  amount  of  money  on  hand.     Rule  the  Cash  account  as  shown  in  illustration  No.  i. 

5th.  Study  very  carefully  §  66,  which  is  an  explanation  of  the  Trial  Balance,  then  follow  instructions  for  "Taking 
a  Trial  Balance,  Jan.  31,  191.  .,"  §  67. 

6th.  Copy  the  Trial  Balance  in  that  part  of  the  blank  book  used  as  a  journal,  as  instructed  on  the  inside  of  front 
cover. 

7th.  Read  §§  74  and  75,  which  is  an  explanation  of  the  fiscal  period  and  inventory,  and  note  illustration  No.  18, 
which  is  a  list  of  goods  on  hand  at  the  close  of  January. 

8th.  Read  and  study  §§  78 — 80;  follow  instructions  for  "Making  the  Financial,  and  Profit  and  Loss  statements. 
Jan.  31,  191 .  .,"  as  given  in  §  81. 

9th.  Present  your  statements  for  approval,  and  when  approved,  copy  them  in  that  part  of  the  blank  book  used  as  a 
journal,  as  instructed  on  the  inside  of  front  cover. 

loth.     Read  §§  84 — 88,  and  follow  instructions  for  "Closing  the  Ledger,  Jan.  31,  191. .,"  as  given  in  §  89. 

nth.     Present  all  books  for  inspection  and  approval. 

I2th.  While  the  teacher  is  examining  your  books,  work  out  exercise  No.  24,  and  present  for  approval.  The 
teacher  will  then  return  your  books  and  you  may  proceed  with  the  month  of  February. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


115 


SELLING  PRICE  LIST  FOR  FEBRUARY. 


Articles. 


Granulated  Sugar  (per  lb.) 

Salt  (per  sack) 

Arbuckle  Coffee  (per  lb.) 

Bacon  (per  lb.) 

Ham  (per  lb.) . 

Shoulder  (per  lb.) 

Lard  (per  lb.) 

Canned  Tomatoes  (per  doz.  cans) 
Canned  Peaches  (per  doz.  cans) . . 
Canned  Apples  (per  doz.  cans) . . . 

Irish  Potatoes  (per  bu.) 

Sweet  Potatoes  (per  bu.) 

Syrup  (per  gallon) 

Beans  (per  bu.) 

Daniel  Boone  Cigars  (per  100).  . 

Creamery  Butter  (per  lb.) 

Eggs  (per  doz.) 

Roller  King  Flour  (per  barrel)  .  . . 
White  Lily  Flour  (per  barrel) .  .  .  . 

Meal  (,per  bu.) 

Bran  (per  1 00  lbs.) 

Hay  (per  100  lbs.) 

Corn  (per  bu.) 

Oats  (per  bu.) 

Oranges  (per  box) 

Lemons  (per  box) 

Bananas  (per  bunch) 

Green  Apples  (per  barrel) 


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ii6  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

MEMORANDA  AND  TRANSACTIONS  FOR  FEBRUARY. 

I.     Deposited  $1,500.00  with  Merchants  National  Bank. 

No  account  will  be  kept  with  the  bank,  hence  it  will  not  be  necessary  to  enter  this  transaction  in  the  journal. 

Received  $12.35  from  Central  Hotel  in  payment  of  their  account. 

Hereafter  all  cash  transactions  will  be  recorded  in  the  cash  book.  An  explanation  of  this  is  given  in  §  114.  If  you 
have  followed  instructions  you  are  familiar  with  the  form  of  the  cash  book,  and  method  of  recording  transactions  in  it. 
The  first  page  of  your  cash  book  is  not  used.     Page  2  is  for  all  receipts,  and  page  3,  for  all  payments. 

Before  recording  any  transactions,  write  the  heading  at  the  top,  as  shown  in  illustrations  Nos.  34  and  35. 
Transfer  the  cash  balance  from  the  cash  account  in  the  ledger,  to  the  debit  side  of  the  cash  book.  (See  first  entry  in  illus- 
tration No.  34.)  On  the  credit  side  of  the  cash  account,  write  in  red  ink,  "Feb.  i.  Balance,  C.  2,  $1547.50,"  and  rule 
the  account  with  single  and  double  red  lines. 

Enter  this  transaction  on  the  debit  side  of  the  cash  book  (page  2)  as  shown  in  second  entry  in  illustration  No.  34, 
and  as  explained  in  §  114,  t  i.  There  are  only  three  steps  necessary  to  enter  a  transaction  in  the  cash  book:  ist,  the  date; 
2d,  the  name  of  the  account  credited  (§  29,  1[  4),  and  the  amount;  3d,  the  explanation.  The  fact  that  the  entry  is  made  on 
the  debit  side  of  the  cash  book,  debits  cash. 

Bought  of  Dick,  McMillan  &  Co.,  on  account,  merchandise  per  invoice  of  this  date,  $379.78. 

Enter  in  the  journal.    This  entry  is  similar  to  the  second  one  in  January. 

Debit  that  which  is  purchased  and  credit  the  person  from  whom  it  was  bought,  unless  payment  is  made.  (Rule  2, 
§42.) 

2.  Sold  Browning  Livery  Co.,  on  account,  3,800  lbs.  Hay  at  $1.00  per  100  lbs.;  20  bu.  Corn  at 
65c;  10  bu.  Oats;  1,000  lbs.  Bran.     Render  them  a  bill  and  enter  in  the  sales  book. 

Have  the  teacher  assign  the  prices  to  be  used  from  those  given  on  page  115.  Use  these  in  all  sales  where  the 
prices  are  not  given. 

Hereafter  all  credit  sales  will  be  entered  in  the  sales  book  and  not  in  the  journal.  This  is  fully  explained  in  §  113, 
and  illustration  No.  33.  If  you  have  followed  instructions,  you  are  already  familiar  with  the  object  of  the  sales  book  and  the 
method  of  making  transactions  in  it.  Open  the  sales  book  at  page  i,  and  at  the  top,  on  the  blue  line,  write  the  name  of 
the  city  in  which  your  school  is  located  and  the  date.  Enter  the  transaction  like  the  first  entry  in  illustration  No.  33. 
To  enter  a  transaction  in  the  journal,  there  are  four  steps  necessary,  but  in  the  sales  book  only  three:  The  date,  the 
name  of  the  person  to  whom  the  goods  are  sold,  and  amount  of  the  sale  and  description  of  the  items  sold. 

Received  check  for  $95.75  from  the  Imperial  Hotel  in  part  payment  of  account. 

In  this  transaction  cash  is  received,  hence  it  must  be  recorded  on  the  debit  side  of  the  cash  book.  Make  the  entry 
in  your  cash  book  the  same  as  the  third  entry  in  illustration  No.  34.  Keep  in  mind  the  three  steps  necessary  to  record 
a  transaction  in  the  cash  book:    1st,  the  date,  2d,  the  name    of  the  account  and  the  amount;    3d,  the  explanation. 

3.  Received  $87.65  for  sundry  cash  sales  to  date. 

Enter  on  the  debit  side  of  the  cash  book,  the  same  as  the  fourth  entry  in  illustration  No.  33. 

Sold  J.  E,  Clark,  on  account,  10  lbs.  Creamery  Butter;  4  cans  Lard,  210  lbs.;  18  cans  Toma- 
toes, $1.85;  50  lbs.  Gran.  Sugar;    10  lbs.  Ar.  Coffee;   5  Hams,  85  lbs.,  at   14c;  3  brls.  White  Lily. 

This  transaction  is  a  sale  on  time.  Enter  in  the  sales  book  the  same  as  the  second  entry  in  illustration  No. 
33.  The  date  is  written  in  the  middle  of  the  page,  just  the  same  as  it  is  in  the  journal,  and  nothing  else  is  written 
on  the  line  with  it.  Note  that  the  name  of  the  account  is  written  at  the  left,  and  the  items  about  one-half  inch  to  the  right. 
There  is  a  blue  line  in  your  book  to  be  used  as  a  guide  for  beginning  the  name  of  each  article  sold. 

Sent  Lake  View  Creamery  a  check  in  payment  of  their  account  in  full. 

This  transaction  requires  a  payment  of  cash  by  check.    Enter  in  your  cash  book.    As  money  is  paid,  it  must  be  en- 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  117 

tered  on  the  credit  side.  There  are  three  steps  necessary  to  make  an  entry  for  cash  paid:  1st,  the  date;  2d,  the  name  of 
the  account  debited  (§  30,  t  i).  and  the  amount;  3d,  the  explanation.  This  explanation  shoulci  always  correspond  with 
the  information  given  after  "For"  on  the  check  stub.    See  first  entry  in  illustration  No.  35. 

5.  Received  check  for  $24.05  in  payment  of  R.  G.  Mathews'  account  in  full. 

Refer  to  their  account  in  the  ledger  to  see  if  the  amount  is  correct.  Enter  on  the  debit  side  of  the  cash  book.  See 
fourth  entry  in  illustration  No.  34,  and  §  114,  ^  i. 

Sold  W.  L.  Wallace,  orf  account,  2  brls.  Roller  King;  8  bu.  Meal;  5  bu.  {rish  Potatoes;  5  bu. 
Corn  at  65c;  5  Hams,  71  lbs. 

Enter  in  the  sales  book.    See  third  entry  in  illustration  No.  33,  and  §  113. 

Sent  Donaldson  Bros,  a  check  for  $125.00,  which  is  to  apply  on  account. 

Enter  in  the  cash  book,  on  the  credit  side  (page  3).    See  second  entry  in  illustration  No.  35,  and  §  114,  t  2, 

6.  Bought  of  J.  Allen  Smith  &  Co.,  on  account,  merchandise  per  invoice  of  this  date,  $291.00. 
Enter  as  instructed  in  §  38. 

Paid  $18.50  for  interior  painting  in  the  office. 

Enter  as  instructed  in  §  114,  1]  2;  debit  §  32.    See  third  entry  in  illustration  No.  35. 

Follow  instructions  given  below. 

1st.  Prove  cash.  (§  115).  Foot  the  debit  side  of  the  cash  book  and  write  the  footings  in  small  pencil  figures  just 
beneath  the  blue  line  on  which  the  last  entry  is  made.  Foot  the  credit  side  of  the  cash  book,  and  write  the  total  in  small 
pencil  figures  just  beneath  the  blue  line  on  which  the  last  entry  is  made.  On  a  piece  of  scratch  paper,  add  the  balance  on 
hand  February  I,  to  the  total  of  the  debit  side.  Subtract  from  this  the  total  of  the  credit  side.  The  difference  should  be 
$1,595.80. 

2d.  Open  accounts  in  the  ledger  with  Dick,  McMillan  &  Co.,  Browning  Livery  Co.,  J.  E.  Clark  and  W.  L.  Wallace. 
Allow  one-third  of  a  page  for  each  account  and  divide  each  page  as  instructed.  • 

3d.  Post  all  items  from  the  sales  book(§  117),  journal  (§  118),  debit  side  of  cash  book  (§  119),  and  credit  side  of  cash 
book  (§  120),  in  the  order  mentioned.  Keep  in  mind  the  fact  that  each  amount  in  the  journal  is  posted  to  the  debit  or 
credit  side  of  the  account  written  on  the  same  line  with  it;  each  amount  in  the  second  column  in  the  sales  book  is  posted 
to  the  debit  side  of  the  person  whose  name  is  written  on  the  same  line  with  it;  each  amount  on  the  debit  side  of  the  cash 
book  is  posted  to  the  credit  side  of  the  account  written  on  the  same  line  with  it;  each  amount  on  the  credit  side  ol  the  cash 
book  is  posted  to  the  debit  side  of  the  account  on  the  same  line  with  it. 

The  total  receipts  and  payments  of  cash  in  the  cash  book,  and  the  total  sales  in  the  sales  book  are  not  posted  until 
a  trial  balance  is  to  be  taken. 

4th.  When  you  have  completed  the  posting,  work  out  exercises  Nos.  25,  26  and  27,  and  present  your  work  for 
approval.     When  these  exercises  are  approved,  you  may  proceed  with  the  transactions. 

7.  Received  checks  from  M.  A.  Johnson  and  A.  R.  Jennings  in  full  of  account. 

Refer  to  the  ledger  for  the  amount  each  owes.    Enter  as  instructed  in  §  114,  ^f  i,  and  shown  in  illustration  No.  34. 

8.  Sold  Central  Hotel,  on  account,  4  brls.  Roller  King;  4  bu.  Meal;  4  cans  Lard,  209  lbs.;  15  lbs. 
Arbuckle  Coffee;  12  scks.  salt. 

Enter  as  instructed  in  §  113,  and  shown  in  illustration  No.  33.     Be  sure  your  calculations  are  correct. 

Sent  J.  Allen  Smith  &  Co.,  a  check  for  $197.10,  in  full  of  invoice  of  Jan.  23. 
Enter  as  instructed  in  §  114,  If  2,  and  shown  in  illustration  No.  35. 


ii8  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


9.  Bought  of  Donaldson   Bros.,   on  account,   merchandise  per  invoice  of    Feb.  7th,  $378.25. 

10.  Received  $107.80  for  sundry  cash  sales  to  date. 

Enter  as  instructed  in  §  114,  T[  i,  and  shown  in  illustration  No.  34 

Sold  M.  A.  Johnson,  on  account,  20  bu.  Corn  at  65  cts.;  3  Hams,  55  lbs;  8  doz.  Eggs;  5  bu.  Oats, 
3  brls.  White  Lily  at  $6,50;  10  sacks  Salt. 

Enter  as  instructed  in  §  113.    For  form,  see  illustration  No.  33.  • 

You  will  have  to  guard  against  the  habit  of  getting  careless  in  doing  the  work  on  your  books.  It  is  through  this  that 
your  teacher  is  enabled  to  judge  of  your  capabilities,  and  give  you  the  proper  grade.  Remember  that  habits  formed  in  the 
schoolroom  may  remain  with  you  in  the  office,  and  that  there  are  no  business  men  who  wish  to  employ  careless  office  help. 

12.  Paid  Allen,  Stephenson  &  Co.,  $35.00  for  a  desk,  and  $5.00  for  an  office  chair. 

The  purchase  of  this  property  will  involve  the  opening  of  a  new  account,  that  of  "Furniture  and  Fixtures." 
Enter  as  instructed  in  §  114,  *\  2.  and  shown  in  illustration  No.  33. 

13.  Sent  Dick,  McMillan  &  Co.,  a  check  for  $150.00  in  part  payment  of  amount  we  owe  them. 
Enter  as  instructed  in  §  114,  *\  2,  and  shown  in  illustration  No.  35 

Received  check  from  Browning  Livery  Co.  for  $48.65,  in  part  payment  of  their  account. 

Enter  as  instructed  in  §  114,  f  i,  and  shown  in  illustration  No.  34. 

Make  a  report  of  the  sales  to  your  teacher  and  present,  together  with  your  books,  for  approval. 

Prove  cash  as  instructed  in  §  115.    See  illustrations  Nos.  34  and  35.    Your  cash  book  should  be  the  same  as  these. 

Post  all  items  from  the  sales  book,  §  117;  journal,  §  118;  debit  side  of  cash  book,  §  119;  and  credit  side  of  cash  book. 
§  120.  Check  the  posting  from  the  ist  to  the  7th  (§  65).  Positively  no  books  will  be  approved  unless  each  item  is  checked, 
Allow  one-third  of  a  page  for  all  new  accounts. 

Present  your  books  for  inspection.  While  the  teacher  is  examining  them,  work  out  exercises  28,  29  and  30  and  pre- 
sent for  approval. 

14.  Bought  of  M.  L.  Ross  &  Co.,  on  account,  merchandise  per  invoice  of  this  date,   $131.15. 

15.  Sold  Cumberland  Hotel,  on  account,  5  doz.  canned  Peaches;  3  doz.  canned  Apples  ;  4  brls. 
White  Lily,  at  $6.50;  3  bu.  Meal;  6  doz.  canned  Tomatoes. 

Received  $66.50  from  A.  R.  David  in  payment  of  3  tons  Hay  at  $20.00,  and  i  brl.  White  Lily 
at  $6.50. 

While  this  is  a  cash  sale,  yet  it  can  be  entered  in  the  sales  book  just  the  same  as  a  regular  credit  sale.  Enter  in 
your  sales  book  the  same  as  other  sales.  Enter  in  the  cash  book  as  shown  in  illustration  No.  34,  9th  entry.  As  the 
bill  is  paid,  there  will  be  no  use  opening  an  account  in  the  ledger  with  A.  R.  David.  To  avoid  posting,  place  a  check  mark 
in  the  L.  F.  column  to  the  left  of  his  name,  in  both  the  cash  book  and  sales  book. 

16.  Bought  of  W.  W.  Scarborough  &  Co.,  on  account,  merchandise  per  invoice  of  this  date, 
$78.00. 

Received  A.  C.  Williams'  15-day  note  dated  today,  in  full  of  account. 

Refer  to  the  ledger  for  the  amount.  Enter  as  instructed  in  §  38.  Debit,  §  123,  ^  2;  credit,§  29,  f  5.  See  illustration 
at  the  top  of  page  119. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


119 


/  ^ 


^x^^ 


A^J2L^^ 


While  Mr.  Williams  still  owes  the  same  amount,  yet  now  it  is  in  the  form  of  a  written  promise  to  pay  at  a  fixed  time; 
the  account,  being  only  our  statement  of  the  amount  of  the  indebtedness,  was  subject  to  dispute  and  might  contain  errors. 
It  is  for  this  reason  that  we  give  his  account  credit  for  the  amount  of  the  note,  and  allow  the  Notes  Receivable  account 
to  show  the  amount  due  us. 

17.     Sent  Hazen  &  Lotspeich  a  check  for  the  balance  due  them. 

Refer  to  their  account  in  the  ledger  for  the  amount      Enter  as  instructed  in  §  114,  \  2,  and  shown  in  illustration 
No.  35. 

Received  cash,  $47.50,  for  sundry  cash  sales  to  date. 

Enter  as  instructed  in  §  114,  1|  i,  and  shown  in  illustration  No.  34. 

Sold  Browning  Livery  Co.,  on  account,  4,877  lbs.  Hay;  50  bu.  Corn;  50  bu.  Oats. 

Enter  as  instructed  in  §  113.    See  illustration  No.  33. 

19.  Received  check  from  C.  L.  Loyd,  in  full  of  account. 

Refer  to  his  account  for  the  amount  of  the  check.    Enter  as  instructed  in  §  114,  ^  i,  and  shown  in  illustration  No.  34. 

20.  Sold  J.   C.  Wilson,  on  account,    100  lbs.  Granulated  Sugar;  16   lbs.   Arbuckle  Coffee;  3 
cans,  152  lbs.,  Lard;  3  brls.  White  Lily  at  $6.50;  3  bu.  Meal;  2  doz.  canned  Tomatoes. 

Gave  Borches  &  Co.  a  note  at  twenty  days  for  the  balance  we  owe  them. 

Refer  to  the  ledger  for  the  amount.    Enter  as  instructed  in  §  38.     Debit,  §  30,  If  2.    Credit,  §  124,  f  3. 


iij^<-<^^=T*<?-^-^!^^— ,:;ai>W--z^,,<?--z.-«>-^^^^/ 


f 


f(^ 


21.     Bought  of  R.  Knaffl,  on  account,  merchandise  per  invoice  of  this  date,  $164.31. 

Sold  Cumberland  Hotel,  on  account,  2  boxes  Oranges;  i  box  Lemons;  5  bunches  Bananas;  4  cans, 
188  lbs..  Lard;  2  brls.  Roller  King. 


I20  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

22.  Accepted  Donaldson  Bros.'  ten-day  draft  for  $47.75.  This  is  for  balance  of  invoice  bought 
Jan.  27th. 

Compare  with  their  account  in  the  ledger  to  determine  the  correctness  of  the  amount,  then  enter  (§38).  Debit  §  30, 
t  2.     Credit,  §  124,   ^4.     See  illustration  at  bottom  of  page  119. 

Bought  of  CuUen  &  Shields,  on  account,  i  ten  foot  show  case,  $25.00. 
Enter  in  §  38;  debit,  §  122,  If  2;  credit.  §  30,  If  10. 

23.  Received  from  J.  C.  Wilson,  his  lo-day  note  for  $42.25,  in  full  for  bill  of  Jan.  27th. 

Compare  with  his  account  in  the  ledger.    Debit,  §  123,  ^  2;  credit,  §  29,  ^  5.      See  illustration  on  page  119. 

Prove  cash  as  instructed  in  §  115.  See  illustrations  Nos.  34  and  35.  Your  cash  book  should  be  the  same  as  these. 
Post  all  amounts  from  the  sales  book,  §  1 17;  journal,  §  118;  debit  side  of  the  cash  book,  §  119;  credit  side  of  the  cash  book, 
§  120.  Check  the  postings  from  the  7th  to  the  13th.  (Do  not  post  amount  charged  A.  R.  David  in  the  sales  book  or  credited 
to  him  in  the  cash  book.) 

Work  out  exercises  Nos.  31,  32  and  33,  in  the  text,  and  present  th'em  for  approval. 

Gave  J.  Allen  Smith  a  check  for  $175.00,  on  account. 

Enter  as  instructed  in  §  114,  f  2,  and  shown  in  illustration  No.  35.  • 

24.  Sold  J.  H.  Porter,  on  account,  4  Hams,  493.^  lbs;  125  lbs.  Granulated  Sugar;  2  cans,  98 lbs., 
Lard;  4  bales,  425  lbs..  Hay  at  $1.10  per  C;  i  brl.  Rollei*  King;  4  bunches  Bananas  at  $2.50;  5  bu. 
Sweet  Potatoes. 

Received  check  from  Browning  Livery  Co.  for  $38.25  on  account. 

Received  cash  from  J.  E.  Clark,  on  account,  $40.00;  sundry  cash  sales,  $95.50. 

Enter  as  instructed  in  §  114,  If  i,  and  shown  in  illustration  No.  34. 

26.  Sold  A.  R.  Jennings,  on  account,  5  brls.  Roller  King;  600  lbs.  Hay  at  $1.10  ;  800  lbs.  Bran; 
49%  bu.  Corn ;  40  bu.  Oats  at  40c;  4  bu.  Irish  Potatoes. 

TO  THE  STUDENT.  In  entering  these  transactions,  you  should  first  make  the  extension  on  scratch  paper,  that 
you  may  get  the  amounts  correct  before  writing  them  in  the  sales  book,  and  thus  avoid  having  to  erase.  Careless  work 
in  the  schoolroom  means  careless  work  in  the  office,  which  is  equivalent  to  a  small  salary  and  slow  promotion. 

27.  Sold  J.  E.  Clark,  on  account,  6  Shoulders,  81  lbs;  2  cans,  loi  lbs.,  Lard;  4  Hams,  47  lbs; 
2  doz.  canned  Peaches;  3  bu.  Beans;  100  lbs.  Granulated  Sugar;  4  brls.  Roller  King. 

28.  Paid  bookkeeper's  salary  for  this  month,  $25.00. 
Enter  as  instructed  in  §  114,  Tf  2;  debit,  §  32,  f  i. 

Paid  rent  and  clerk  hire,  $35.00;  stamps,  $2.50;  and  balance  due  clerk,  $9.25. 

Make  a  report  of  sales  and  present  it,  together  with  your  books,  to  the  teacher  for  inspection,  after  which  you  will 
follow  instructions  given  below: 

1st.  Prove  Cash.  Have  the  teacher  approve  your  cash  balance.  Rule  the  cash  book  as  shown  in  illustrations 
Nos.  34  and  35. 

2d.  Post  all  items  to  date  (§§  116 — 120),  and  check  the  postings  from  the  14-28.  Rule  personal  accounts  when  they 
balance,  (§62),  Allow  one-third  of  a  page  for  all  new  accounts.  Your  books  will  not  be  approved  unless  each  item  is  checked  in 
the  books  oj  original  entry  and  ledger. 

3d.  Foot  and  rule  the  sales  book  as  shown  at  the  bottom  of  illustration  No.  33.  Post  the  total  to  the  credit  side  of 
the  Merchandise  account,  §  117. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


121 


4th.  Foot  all  the  accounts  having  more  than  one  debit  or  credit  amount.  Take  the  difference  of  the  personal  ac- 
counts and  place  the  amount  in  the  explanation  column  on  the  larger  side. 

5th.     Take  a  Trial  Balance  as  instructed  in  §  125,  also  §  66  and  §  67. 

6th.  Make  the  Financial,  and  Profit  and  Loss  statements  as  instructed  in  §  126  and  §  127,  and  §§  78 — 81.  In- 
ventories:  Mdse.,  goods  on  hand,  $1,502.90.    Furniture  and  Fixtures,  desk,  chair  and  show  case  on  hand,  $60.00.    ' 

7th.  Close  the  ledger  as  instructed  in  §  128  and  §  84.  For  closing  Furniture  and  Fixtures  account,  see  illustration 
No.  36.     Present  books  for  approval. 

8th.     While  the  teacher  is  examining  your  books,  work  out  exercise  No.  34,  in  the  text. 

SELLING  PRICE  LIST  FOR  MARCH. 


Articles. 


Granulated  Sugar  (per  lb.) 

Salt  (per  sack) 

Arbuckle  Coffee  (per  lb.) 

Bacon  (per  lb.) 

Ham  (per  lb.) 

Shoulder  (per  lb.) 

Lard  (per  lb.) 

Canned  Tomatoes  (per  doz.  cans) 
Canned  Peaches  (per  doz.  cans) . . 
Canned  Apples  (per  doz.  cans) . .  . 

Irish  Potatoes  (per  bu.) 

Sweet  Potatoes  (per  bu.) 

Syrup  (per  gallon) 

Beans  (per  bu.) 

Daniel  Boone  Cigars  (per  100).  .  . 

Creamery  Butter  (per  lb.) 

Eggs  (per  doz.) 

Roller  King  Flour  (per  barrel)..  .. 
White  Lily  Flour  (per  barrel) .  .  .  . 

Meal  (per  bu.) 

Bran  (per  100  lbs.) 

Hay  (per  100  lbs.) 

Corn  (per  bu.) 

Oats  (per  bu.) 

Oranges  (per  box) 

Lemons  (per  box) 

Bananas  (per  bunch) 

Apples  (per  barrel) 


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122  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

MEMORANDA  OF  TRANSACTIONS  FOR  MARCH. 

Hereafter  all  credit  purchases  will  be  entered  in  the  purchases  book,  and  not  in  the  journal.  Note  explanation  of  this 
book  in  §  130  and  illustration  No.  42.  Use  the  last  page  of  the  cash  book  and  enter  the  transactions  there,  the  same  as  the 
first  entry  in  the  illustration. 

1.  Considering  the  fact  that  yoa  are  becoming  more  proficient  in  your  work,  and  that  the 
business  is  increasing,  your  salary  has  been  increased  $10.00  per  month.  You  should  appreciate 
this  and  act  accordingly. 

DO  YOU  THINK  YOU  ARE  ENTITLED  TO  AN  INCREASE?  HAVE  YOU  BEEN  DOING  YOUR  BEST 
AND  TRYING  TO  IMPROVE?  THAT  IS  WHAT  IT  TAKES  TO  OBTAIN  AN  INCREASE  IN  SALARY  WITH- 
OUT ASKING  FOR  IT. 

Have  closed  a  deal  with  M.  V.  Hoffman,  for  the  purchase  of  the  store  house  in  which  we  are 
doing  business,  and  the  lot  on  which  it  is  located.  The  amount  paid  is  $1,000.00,  and  a  check  has 
been  sent  Mr.  Hofifman  for  this  amount.  The  deed  has  been  sent  to  the  Register's  office  to  be 
recorded. 

Enter  as  instructed  in  §  114,  f  2.  Debit  §  132,  ^  2.  Begin  on  a  new  page  in  the  cash  book.  Enter  the  balance 
on  the  first  blue  line  at  the  top  of  new  page,  same  as  the  beginning  of  February. 

Received  of  Cumberland  Hotel,  P.  A.  Banesforth's  note  for  $87.65,  dated  Feb.  14th,  and  due 
in  30  days,  with  interest,  to  apply  on  account. 

Enter  as  instructed  in  §  38;  debit,  §  123.     See  illustration  below. 

2.  Bought  of  Kaiser  Bros.,  on  account,  merchandise  per  invoice  of  this  date,  $113.80. 
Enter  in  the  purchases  book  (§  130,  illustration  No.  42),  and  not  in  the  journal. 

Received  check  from  Browning  Livery  Co.,  for  $39.87,  to  apply  on  account. 

Sold  R.  A.  Carson  &  Son,  on  account,  1,500  lbs.  Hay;  500  lbs.  Bran;  25  bu.  Corn;  50  bu.  Oats. 

To  the  student.  Use  the  same  number  in  the  price  list  for  March,  as  that  assigned  at  the 
beginning  of  February. 

3.  Received  check  and  note  at  20  days  for  $39.50  from  the  Central  Hotel,  in  full  of  account. 

This  transaction  requires  two  entries;  one  for  the  check  (difference  between  the  face  of  note  and  balance  due),  and 
the  other  for  the  note.  Enter  the  check  on  the  debit  side  of  the  cash  book,  writing  "In  full  of  account"  for  the  explana- 
tion. Enter  the  note  in  §  38  debit  (§  123,  ^  2),  and  credit  (§  29,  ^f  5).  The  explanation  should  be  "Received  their  20- 
day  note  of  even  date  on  account." 

Sent  J.  Allen  Smith  &  Co.,  a  check  in  full  of  account. 

Received  check  for  $42.30,  in  payment  of  A.  C.  Williams'  note  due  today. 

As  cash  is  received  in  this  transaction,  it  is  necessary  to  enter  it  on  the  debit  side  of  the  cash  book.  While  the  check 
is  signed  by  Mr.  Williams,  yet  it  is  not  in  payment  of  his  account,  but  a  note;  hence,  "Notes  Receivable"  must  be  written 
as  the  name  of  the  account  credited.    The  explanation  is  "A.  C.  Williams'  note,"  (§  123,  ^  4). 

Mr.  Williams'  account  was  credited  for  the  value  of  this  note  when  it  was  received,  and  to  credit  his  account  for  the 
the  check,  would  be  incorrect  because  it  would  give  him  credit  for  the  payment  twice. 

Received  cash  from  J.   E.  Clark,  on  account,   $20.15;  sundry  cash  sales,  $51.35. 

4.  Sold  R.  G.  Mathews,  on  account,  5  brls.  Roller  King;   10  Hams,    186  lbs.;  10  gal.  Syrup. 

5.  Paid  by  check,   Donaldson  Bros.'   ten-day  draft,    which  was  accepted  Feb.  22,  $47.75. 
Enter  as  instructed  in  §  114,  ^  2.     Debit,  §  124,  ^  i. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  123 

Bought  of  the  Procter  &  Gamble  Co.,  subject  to  draft  at  ten  days,,  merchandise  per  invoice 
received  this  date,  $155.00. 

Enter  as  instructed  in  §  130  and  illustration  No.  42. 

TO  THE  STUDENT.  The  terms,  "Draft,  10  days,"  indicate  that  the  seller  will  draw  a  ten-day  draft  for  the 
amount. 

Sold  C.  L.  Loyd,  on  account,  50  lbs.  Bacon;  40  lbs.  Ham;  2  brls.  White  Lily;  10  sacks  Salt. 

Received  check  for  $42.25  in  payment  of  J.  C.  Wilson's  note  due  today. 

Enter  in  the  same  manner  as  the  third  transaction  on  Mch.  3 

6.  Accepted   draft   drawn   by   Donaldson    Bros,   at   fifteen  days'    sight,    for  $378.25. 
Note  explanations  and  instructions  given  under  the  first  transaction  on  Feb.  22. 

Paid  K.  &  O.  R.  R.,  $16.75,  ^^  currency,  for  freight  on  goods  purchased  from  the  Procter  & 
Gamble  Co.,  on  the  5th. 

Enter  as  instructed  in  §  114,   ^2;  debit,  §  31,  ^  3- 

When  you  have  completed  the  record  of  the  above  transaction,  proceed  as  follows: 

1st.     Prove  cash  as  instructed  in  §  115.     Have  your  balance  approved  by  the  teacher. 

2d.  Post  all  the  items  from  the  sales  book  (§  117),  purchases  book  (§  130,  ^  i),  journal  (§  118),  debit  (§  119),  and 
credit  (§  120),  sides  of  the  cash  book.  Each  account  in  the  journal  is  debited  or  credited  for  the  amount  written  on  the 
same  line  with  it,  according  to  the  column  in  which  it  is  entered.  Each  account  in  the  sales  book  is  debited  for  the  amount 
written  on  the  same  line  with  it.  Each  account  in  the  purchases  book  is  credited  for  the  amount  on  the  same  line  with  it. 
The  totals  of  the  sales  book  and  purchases  book  are  not  posted  until  a  trial  balance  is  to  be  taken.  The  time  of  notes 
and  drafts,  and  special  terms  on  invoices  must  be  written  in  the  explanation  column  in  the  ledger.  Each  account  on  the 
debit  side  of  the  cash  book  is  credited  for  the  amount  written  on  the  same  line  with  it,  and  each  account  on  the  credit  side 
of  the  cash  book  is  debited  for  the  amount  written  on  the  same  line  with  it. 

When  you  have  finished  posting,  work  out  exercises  Nos.  35,  36  and  37,  and  present  for  approval. 

7.  Paid  CuUen  &  Shields,  invoice  of  Feb.  22. 

Bought  of  J.  Allen  Smith  &  Co.,  on  account,  merchandise  per  invoice  of  this  date,  $242.35. 
Enter  as  instructed  in  §  130,  and  illustration  No.  42. 

8.  Received  from  J.  H.  Porter,  his  15-day  note  dated  today,  in  full  of  account. 

Refer  to  his  account  in  the  ledger  for  the  amount.     Debit,  §  123,  1|  2,  and  credit,!  29,  ^  5. 

Sold  Imperial  Hotel,  on  account,  6  brls.  Roller  King;  4  brls.  White  Lily;  6}4  bu.  Irish  Potatoes; 
3  bu.  Meal;  12  sacks  Salt. 

Received  cash  from  Cumberland  Hotel,  on  account,  $15.15;  also  for  sundry  cash  sales,  $60.75. 

Paid  $25.00  for  repairs  on  the  building. 

Enter  in  §  114,  If  2;  debit,  §  133,  1  i. 

9.  Accepted  draft  at  ten  days'  sight,  for  amount  of  bill  bought  on  the  5th,  from  the  Procter 
&  Gamble  Co. 

Refer  to  their  account  in  the  ledger  for  the  amount.     Debit,  §  30,  t  3;  credit,  §  124,  If  4- 

Received  check  from  J.  C.  Wilson  for  $29.86. 


124  20TH  .CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

10,  Sold  J.  E.  Clark,  on  account,  2  brls.  Roller  King;  800  lbs.  Hay;  600  lbs.  Bran;  3  bu.  Meal; 
195  lbs.  Bacon;  9  sacks  Salt. 

TO  THE  STUDENT.  You  will  have  to  guard  against  carelessness  in  making  these  extensions.  Keep  in  mind 
the  fact  that  habits  formed  in  the  school  room  are  apt  to  become  permanent,  a  circumstance  which  would  be  very  unfor- 
tunate in  an  office,  if  the  habits  are  bad. 

Bought  of  W.  W.  Scarborough  &  Co.,  on  account,  merchandise  per  invoice  of  this  date, 
$148.75. 

See  illustration  No.  42,  and  §  130. 
Paid  R.  Knafifl  $75.00  on  account. 

12,  Gave  W.  W.  Scarborough  &  Co.,  a  check  for  $96.80,  to  apply  on  account. 

Sold  Browning  Livery  Co.,  on  account,  61  bu.  Corn  at  60  cents;  30  bu.  Oats;  1,200  lbs.  Hay; 
800  lbs.  Bran. 

Gave  cashier  of  the  bank  check  for  $96.00,  in  payment  of  our  note  due  today. 
Enter  as  instructed  in  §  114,  1  2;  debit,  §  124,  f  i. 

13.  Received  check  from  Imperial  Hotel  for  $61.85,  ^^  account. 
Paid  $20.00  for  clerks'  salaries. 

Debit  §  32,  1[  I,  and  credit  §  114,  t  2.     Why.-* 

13.  Bought  of  Hazen  &  Lotspeich,  merchandise  per  invoice  of  the  12th,  $245.70. 

Enter  in  the  purchases  book,  as  shown  in  illustration  No.  42.  Keep  in  mind  the  three  steps  necessary  to  record  a 
transaction  in  the  purchases  book:  ist,  the  date;  2d,  the  name  of  the  person  from  whom  the  goods  were  purchased,  and  the 
amount;   3d,  the  explanation. 

14.  Received  cash  from  J.  C.  Wilson,  in  full  of  account. 
Received  note  at  15  days  from  A.  R.  Jennings,  in  full  of  account. 

15.  Gave  Dick,  McMillan  &  Co.  a  note  at  90  days,  with  interest,  for  the  balance  due  them. 

Received  check  from  Browning  Livery  Co.  for  $25.00,  to  apply  on  account. 

Sold  J.  C.  Wilson,  on  account,  300  lbs.  Hay;  2  cans,  108  lbs..  Lard;  4  Shoulders,  55K  lbs; 
3    bu.  Meal;  2  brls.  White  Lily. 

Make  a  report  of  sales  and  present,  together  with  your  books,  for  inspection,  then  follow  instructions  below: 

Xst.     Prove  cash  as  instructed  in  §  115.     Have  your  balance  approved  by  the  teacher. 

2d.  Rule  the  cash  book  as  instructed,  at  the  close  of  February;  if  you  are  not  sure  about  the  form,  refer  to  illustra- 
tions Nos.  34  and  35. 

3d.  Post  all  amounts  from  the  sales  book,  purchases  book,  journal,  debit  and  credit  sides  of  the  cash  book. 
Keep  in  mind  the  fact  that  each  person  in  the  sales  book  is  debited  with  the  amount  of  his  purchase,  and  that  each  person 
in  the  purchases  book  is  credited,  for  the  amount  purchased  from  him.  Each  amount  that  appears  on  the  debit  side  of  the 
cash  book  is  posted  to  the  credit  side  of  that  account  in  the  ledger,  and  each  amount  on  the  credit  side  of  the  cash  book 
is  posted  to  the  debit  side  of  that  account  in  the  ledger.  New  accounts  are  allowed  one-third  of  a  page,  the  page  being 
divided  by  red  lines,  as  instructed. 

4th.  Rule  the  sales  book  in  the  same  manner  as  you  did  February  28th.  Refer  to  illustration  No.  33  if  you  are  not 
sure  about  the  form.  Post  the  total  sales  to  the  credit  side  of  the  Merchandise  account.  Write  "Credit  Sales"  in  the  ex- 
planation column. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  125 


5th.  Foot  and  rule  the  purchases  book,  as  shown  in  illustration  No.  42.  Post  the  total  to  the  debit  side  of  the  Mer- 
chandise account,  writing  "Credit  Purchases"  in  the  explanation  column. 

6th.  Check  the  postings  to  date.  Keep  in  mind  the  fact  that  your  books  will  not  be  approved  unless  each  item  in 
all  books  of  original  entry  and  the  ledger  is  checked. 

7th.  Take  a  Trial  Balance.  Proceed  as  follows:  Add  the  debit  and  credit  sides  of  each  account  that  has  more  than 
one  entry,  and  enter  the  total  with  small  pencil  figures  just  beneath  the  line  on  which  the  last  amount  is  written;  take  the 
difference  of  the  personal  accounts,  writing  each  with  small  pencil  figures  in  the  explanation  column  on  the  larger  side;  on  a 
sheet  of  journal  paper,  list  the  accounts  as  they  appear  in  the  ledger,  beginning  with  W.  H.  Goodwin,  on  page  i;  write 
Cash  on  the  line  below  Mr.  Goodwin's  name,  and  place  the  balance  in  the  debit  column.  The  first  column  of  the  Trial  Bal- 
ance represents  the  debit  side  of  the  ledger,  and  the  second  column  the  credit  side,  hence,  the  debit  and  credit  totals  on  the 
ledger  are  entered  in  the  columns  which  represent  the  side  of  the  ledger  on  which  the  amount  appears.  The  balance  of 
personal  accounts  is  used.     If  the  work  is  correct,  the  two  sides  of  the  Trial  Balance  will  be  equal.     ( §  66.) 

8th.  Present  your  Trial  Balance  to  the  teacher  for  approval,  and  when  he  has  approved  it,  copy  as  instructed 
on  the  inside  of  the  front  cover  of  the  journal. 

9th.  Present  all  books  to  the  teacher  for  approval.  While  the  teacher  is  examining  your  books,  work  out  exercises 
Nos.  38,  39  and  40. 

16.  Sold  Cumberland  Hotel,  on  account,  3  brls.  White  Lily;  4  cans,  186  lbs.,  Lard;  6  Hams,  97 
lbs;  5  bu.  Sweet  Potatoes;  4  doz.  canned  Tomatoes. 

Received  check  in  payment  of  30-day  note  due  today,  $87.65,  and  interest  on  same,  44  cents. 

No  entry  was  made  for  the  amount  of  this  interest  at  the  time  the  note  was  received,  and  as  nothing  was  given 
out  for  it,  the  amount  is  a  clear  profit. 

Enter  as  instructed  in  §  114,  ^  i;  credit  §  123,  t  4,  and  §  135,  14.     Make  two  separate  entries. 

Sold  W.  W.  Scarborough  &  Co.,  on  account,  i  brl.  White  Lily  Flour  at  $6.50;  10  lbs.  Arbuckle 
Coffee  at  20  cents. 

17.  Bought  of  Borches  &  Co.,  on  account,  merchandise  per  invoice  of  this  date,  $205.10. 
Received  cash,  $72.00,  for  sundry  cash  sales  to  date. 

19.  Received  check  from  C.  L.  Loyd,  in  full  of  account. 

Paid  the  ten-day  draft,  $155.00,  drawn  by  the  Procter  &  Gamble  Co.,  due  at  bank  today. 

20.  Sold  Browning  Livery  Co.,  on  account,  2,358  lbs.  Hay;  60  bu.  Corn;  15  bu.  Oats;  3,129 
lbs.  Bran. 

Sold  A.  R.  Jennings,  on  account,  10  brls.  Apples;  3    boxes  Oranges;  50  doz.  Eggs.  1 

Bought  of  Lake  View  Creamery,  on  ten  days'  time,  merchandise  per  invoice  of  March  i8th,  $56.00. 

Received  check  from  Imperial  Hotel  in  full  of  account. 

The  ledger  contains  a  history  of  each  account,  if  all  items  are  posted.    See  that  you  get  this  entry  correct. 

21.  As  I  have  not  very  much  money  in  the  bank,  and  a  number  of  accounts  will  soon  be  due, 
I  have  borrowed  $400.00  from  the  bank.    Paid  the  interest,  $2.67,  by  check. 

The  bank  charged  8  per  cent  interest  on  the  money  for  30  days,  and  required  this  interest  paid  in  advance.  Sometimes 
the  interest  is  deducted  from  the  amount  on  the  face  of  the  note,  and  the  depositor  credited  with  the  proceeds.  It  is  better 
to  write  a  check  in  favor  of  the  bank,  and  receive  credit  for  the  full  amount  on  the  face  of  the  note. 


126  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Read  §  124,  Tf  3,  and  §  135.  t  2.     Enter  the  transaction  in  the  cash  book  (§114,  Tf  1|  i  and  2.) 

Paid  $25.00  for  clerk's  salary  and  other  expenses. 

Book,  §  114,  %2;  account  debited,  §  32,  t  i. 

Paid  at  the  bank,  draft  drawn  by  Donaldson  Bros,  $378.25. 

Book,  §  114,  t  2;  account  debited,  §  124,  ^  i. 

22.  Received  check  from  W.  L.  Wallace,  in  full  of  account. 

Sold  Central  Hotel,  on  account,  5  cans  of  Lard,  254  lbs;  i  doz.  Shoulders,  278  lbs.,  at  9c;  2 
brls.  Apples;  50  lbs.  Arbuckle  Coffee;  5  bu.  Beans. 

Sold  R.  A.  Carson  &  Son,  on  account,  5  brls.  White  Lily;  10  bu.  Meal;  5  bu.  Irish  Potatoes;  500 
Daniel  Boone  Cigars;  i  doz.  Hams,  238  lbs;  10  sacks  Salt. 

Bought  of  Kaiser  Bros,  merchandise  per  invoice  of  the  20th,  $30.00. 

Proceed  as  follows: 

1st.     Prove  cash  as  instructed  in  §  115.     Have  the  teacher  approve  your  balance. 

2d.  Post  all  amounts  from  the  sales  book,  (§  1 17),  purchases  book  (§  130,  f  i)  and  journal  (§  1 18),  debit  side  (§  119), 
and  credit  side  (§  120),  of  the  cash  book.  Do  not  post  the  total  sales  or  purchases.  Be  sure  to  post  from  the  books 
in  the  order  named.  If  it  is  necessary  to  open  new  accounts,  allow  one-third  of  a  page  for  each,  and  divide  the  page  with 
red  lines,  as  instructed. 

3d.     Work  out  exercise  No.  41  and  present  for  approval. 

23.  Received  check  for  $39.50,  in  payment  of  note  due  today. 
Enter  as  instructed  in  §  114,  f  i;  credit,  §  123,  1[  4. 

Sold  J.  H.  Porter,  on  account,  4  Hams,  67  lbs.;  2  cans  Lard,  99  lbs.;  57  lbs.  Bacon  at  14c;  9  lbs. 
Arbuckle  Coffee;  4  bu.  Irish  Potatoes;  2  brls.  Roller  King;   2  doz.  canned  Peaches. 

Received  check  in  payment  of  15-day  note  received  March  8. 
Enter  in  §  114,  1[  r;  credit,  §  123,  ][  4. 

24.  Gave  M.  L.  Ross  &  Co.  a  check  for  the  balance  due  them. 

Bought  of  Latham  &  Agee,  merchandise  per  invoice  of  this  date,  $40.00. 

Sold  C.  L.  Loyd,  on  account,  10  bu.  Irish  Potatoes;  3  brls.  Roller  King;  5  bu.  Sweet  Potatoes, 
20  sacks  Salt;    2  doz.  canned  Tomatoes. 

Received  cash,  $174.50,  for  sundry  cash  sales  to  date. 

26.  Sold  W.  A.  Davis  the  entire  business,  including  goods  on  hand,  furniture  and  fix- 
tures, store  house  and  lot.  He  will  take  possession  on  the  31st  inst.,  paying  $1979.46,  cost  price  of  the 
goods  on  hand  at  that  time,  $50.00  for  desk,  show  case,  etc.,  and  $1,200.00  for  the  building  and  lot. 
All  customers  who  owe  us  have  been  notified  that  settlement  must  be  made  at  once  that  outstanding 
obligations  may  be  met. 

No  entry  is  required  until  the  transaction  is  completed. 

Sent  W.  W.  Scarborough  &  Co.  a  check  in  full  of  account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  127 


27.     Sent  the  Daily  News  Co.  a  check  for  $10.87,  ^^  payment  of  advertising  to  date. 
As  this  is  one  of  the  costs  of  conducting  the  business,  the  amount  is  charged  to    §  32,  T[  i. 

Gave  R.  Knaffl  a  check  in  full  of  account. 

29.  Received   checks   from   J.    C.    Wilson,    Cumberland   Hotel,    Browning  Livery   Co.,   J.  H. 
Porter,  J.  E.  Clark  and  M.  A.  Johnson,  each  in  full  of  account. 

Enter  as  instructed  in  §  114,  T|  i.     Make  a  list  of  these  and  present  to  the  teacher  for  approval. 

30.  Received  check  from  A.  R.  Jennings  in  payment  of  his  note,  received  March  14. 
Received  check  from  W.  A.  Davis  for  $3,229.46,  as  per  contract  made  March  26th. 

Credit  §  31,  1  5,  with  $1,979.46;  §  122,  ^  3,  $50.00;  and  §  132,  t  6,  for  $1,000.00;  and  §  133,  If  4,  for  $200.00. 

31.  Credit  the  Real  Estate  Expense   and  Revenue    account    for    $35.00,    the  amount   which 
would  have  been  paid  for  rent  had  the  building  belonged  to  someone  else. 

Enter  in  §  38.     Debit,  §  32,  If  I ;  credit,  §  133,  t  3. 

Received  cash  for  sundry  cash  sales  to  date,  $80.50. 

Received  checks  from  R.  A.  Carson  &  Son,  A.  R.  Jennings,  Central  Hotel,  R.  G.  Mathews,  and 
C.  L.  Loyd,  each  in  full  of  account. 

Make  a  list  and  present  for  approval. 

Sent  checks  to  all  the  (6)  persons  whom  we  owe,  in  full  of  account. 

Make  a  list  of  the  creditors  and  have  it  approved  before  entering  in  the  cash  book. 

Sent  Dick,  McMillan  &  Co.,  a  check  for   $230.35,    to   pay   the   note  we   owe    them,    and   57c 
interest  to  date. 

Enter  (two  entries)  as  instructed  in  §  114.  If  2;  debit,  §  124,  1  i,  and  §  135,  Tf  I. 

Paid  bookkeeper's  salary  for  March,  and  $50.00  for  balance  due  clerk  and  sundry  expenses. 

Do  you  know  what  the  amount  should  be?     Debit  §  32,  ^  i- 

By  special  agreement,  the  bank  has  accepted  a  check  for  $400.00,  amount  of  our  note,  which 
is  not  yet  due. 

A  note  can  not  be  paid  before  maturity  except  by  special  agreement.     Debit  §   124,  ^i. 

Make  the  Financial,  and  Profit  and  Loss  statements  to  show  the  profits  for  the  fiscal  period  end- 
ing March  31. 

You  will  have  to  post  and  take  a  Trial  Balance  before  this  can  be  done.    Follow  instructions  below. 

1st.     Make  a  report  of  the  sales  and  have  it  approved. 

2d.      Prove  cash    (§    115),  and  rule  the  cash  book.    Have  cash  balance  approved  by  teacher.    If  you  are  in  doubt 
about  the  form,  refer  to  illustrations  Nos.  34  and  35. 

3d      Post  and  check  all   items   to   date.    Each  entry  in  the  books  of  original  entry  and  ledger  must  be  checked, 
otherwise  your  books  will  not  be  approved. 

4th.     Rule  the  sales  book  and  post  the  total  to  the  credit  side  of  the  Merchandise  afccount.     (§  113  and  illustration 
No.  33.) 

5th.     Rule  the  purchases  book  and  post  the  total  to  the  debit  side  of  the  Merchandise  account.     (§  130,  t  i,  and 
illustration  No.  42.) 


128  20 TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

6th.  Take  a  Trial  Balance  (§  140  and  §  66),  using  both  sides  of  all  the  accounts  that  have  debits  and  credits. 
Enter  the  cash  balance  on  the  next  line  below  W.  H.    Goodwin,  Capital. 

7th.  Make  the  Financial  (§  141),  and  Profit  and  Loss  (§  142)  statements.  As  all  debts  due  the  business  have  been 
collected,  all  outstanding  obligations  paid,  and  all  property  sold  for  cash,  the  only  resource  will  be  cash;  there  are  no  li- 
abilities.    Refer  to  illustrations  Nos.  39  and  40  for  the  form  of  the  statements. 

8th.  Close  the  ledger  (§  143)  as  follows:  Transfer  the  balance  of  the  following  accounts  to  Profit  and  Loss:  Ex- 
pense (§  32  and  §  87);  Furniture  and  Fixtures  (§  122  and  §  87);  Merchandise  (§  31  and  §  87);  Interest  (§  135  and  §  87); 
Real  Estate  Expense  and  Revenue  (§  133  and  §  87).  Close  the  balance  of  the  Profit  and  Loss  account  (§  33  and  §  87) 
into  W.  H.  Goodwin,  Capital  account  (§  34).  Rule  and  foot  W.  H.  Gc*dwin's  account  and  bring  down  the  Present  Capital  on 
the  credit  side.  You  will  observe  that  this  is  exactly  the  same  as  the  cash  balance.  This  is  proof  that  the  difference  be- 
tween the  resources  and  liabilities  in  a  business  must  always  be  the  same  as  the  present  capital. 

9th.     Present  your  books  for  approval.     While  the  teacher  is  examining  them,  work  out  exercise  No.  42. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  129 

PART  II. 

PARTNERSHIP. 
APRIL. 

RETAIL  HAY,  GRAIN  AND  FEED  BUSINESS,  C.  W  KEELAND  &  CO.,  PROPRIETORS. 

Introducing  accounts  with  partners;  special  accounts  with  merchandise;  special  accounts  with 
expense;  special  accounts  with  fixed  investments;  special  columns  in  the  cash  book;  carbon  copy 
sales  book ;  special  form  of  the  purchases  book ;  other  features  that  pertain  to  the  best  methods  of 
bookkeeping  and  accounting. 

The  object  of  this  set  is  to  teach  the  student  the  practical  application  of  the  principles  learned 
in  the  preceding  work.  A  sufficient  number  of  transactions  are  given  to  enable  him  to  appreciate 
the  importance  of  accuracy,  neatness  and  a  systematic  record.  The  student  of  bookkeeping  and  ac- 
counting must  understand  the  fundamental  principles  of  the  subject  and  acquire  the  ability  to  put 
this  knowledge  into  practice.  The  value  of  his  services  will  depend  upon  his  understanding  of  the 
subject  and  his  ability  to  practically  apply  the  same. 

PARTNERSHIP. 

§  145.  A  Partnership  is  the  relation  existing  between  two  or  more  persons  who  have  associated 
their  time,  labor,  skill  and  capital  in  some  business  enterprise.  The  partners  are  the  persons  who 
have  entered  into  the  agreement  to  form  a  partnership. 

§  146.  The  Object  of  forming  a  Partnership  is  for  the  mutual  benefit  of  all  interested.  The 
qualifications  and  natural  ability  of  each  person  differ  widely.  One  seldom  possesses  all  the  require- 
ments for  an  ideal  business  man.  For  this  reason,  the  association  together  as  partners  is  often  very 
desirable.  A  shrewd  buyer,  a  good  salesman,  and  an  excellent  collector,  will  form  a  partnership  that 
is  sure  to  succeed.  While  the  necessary  capital  for  conducting  the  business  is  usually  the  chief  incen- 
tive to  the  formation  of  a  partnership,  yet  the  natural  ability  of  each  partner  should  always  be  con- 
sidered, especially  if  he  is  to  take  an  active  part  in  the  business. 

§  147.  The  Capital  of  a  Partnership  is  the  amounts  invested  by  the  partners,  either  at  the  be- 
ginning or  at  subsequent  times,  and  the  accrued  profits.  This  property  does  not  belong  to  any  one 
of  the  partners,  either  as  a  whole  or  a  part,  but  belongs  to  all  of  them  in  common,  and  no  partner  has 
the  right  to  dispose  of  it  without  the  consent  of  each  individual.  Should  a  dispute  arise  in  regard 
to  this  and  no  agreement  can  be  effected,  the  matter  will  have  to  be  settled  by  some  court  of  equity, 
as  partners  can  not  sue  each  other  in  a  court  of  law. 

§  148.  The  Articles  of  Copartnership  is  the  agreement  or  contract  entered  into  by  the  part- 
ners at  the  beginning  of  the  business  and  must  conform  to  the  laws  of  the  state  in  which  it  is  made. 
This  agreement  should  be  in  writing,  although,  under  certain  circumstances,  a  verbal  one  is  legal. 
It  should  state  the  time  the  partnership  is  to  continue;  the  name  under  which  they  will  do  business; 
the  amount  invested  by  each;  the  place  of  business;  the  nature  of  the  business;  the  duties  of  each  part- 
ner; the  amount  to  be  withdrawn  by  each  partner;  the  division  of  the  profits;  such  special  conditions 
as  may  be  deemed  necessary.     Each  partner  signs  the  articles  of  agreement  and  retains  a  copy. 

^  I.  The  Time.  Unless  the  specific  time  is  mentioned,  the  court  will  assume  that  the  partner- 
ship is  to  exist  for  one  year,  and  it  may  be  dissolved  at  the  end  of  a  year  if  either  partner  asks 
for  a  dissolution.    For  this  reason,  the  number  of  years  that  the  partnership  is  to  exist  should  be  stated. 

^  2.     Name.     The  partnership  can  do  business  under  any  name  that  the  partners  may  select, 


130  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

provided  this  name  does  not  interfere  with  the  right  of  someone  else.  As  a  general  rule,  the  firm  name 
contains  the  names  of  the  partners  who  are  most  active  in  the  business.  The  firm  name  of  Jones, 
Smith  &  Co.  does  not  necessarily  mean  that  there  are  more  parties  interested  in  the  business  than 
Jones  and  Smith,  except  in  a  few  states  where  the  law  does  not  permit  the  use  of  the  word  "Com- 
pany" unless  it  is  represented  by  one  or  more  persons.  The  Union  Mfg.  Co.  might  be  selected  as 
a  name  for  the  partnership,  thus  not  mentioning  the  name  of  any  individual  connected  with  it.  Since 
each  partner  is  interested  in  the  success  of  the  business,  and  his  personal  influence  is  worth  some- 
thing to  the  business,  it  is  really  best  to  use  the  names  of  the  partners  as  the  firm  name. 

^  3.  Amount  Invested.  This  refers  to  the  amount  invested  at  the  beginning  of  the  business, 
and  any  subsequent  investments.  The  property  invested  is  usually  cash,  but  might  be  any  other 
property,  either  tangible  or  intangible,  that  the  partners  agree  to  accept.  Sometimes  the  personal 
influence  or  ability  of  one  particular  partner  is  accepted  as  his  investment.  A  full  description  of  the 
amounts  invested  at  the  beginning,  and  if  desired,  subsequent  investments,  should  be  outlined  in  the 
agreement  that  there  may  be  no  misunderstanding. 

^[  4.  Place  of  Business.  This  usually  refers  to  the  city  or  town  in  which  the  partners  are  to  do 
business,  though  it  may  indicate  the  street  and  number  of  the  building  where  the  business  is  to  be 
located.  This  is  not  as  important  a  point  as  some  others,  because,  as  a  general  rule,  it  is  understood 
that  the  partnership  is  to  do  business  in  the  town  where  the  agreement  is  signed. 

^  5.  Nature  of  the  Business.  It  is  best  to  describe  in  detail  the  nature  of  the  business  to  be 
conducted,  so  that  there  will  be  no  occasion  for  dispute. 

^  6.  Duties.  A  general  outline  of  the  duties  to  be  performed  by  each  partner  should  be  spe- 
cifically stated  in  the  agreement.  Each  partner  should  be  assigned  such  work  as  is  best  suited  to  his 
natural  ability.  Unless  the  duties  of  each  partner  are  outlined  in  the  agreement,  there  is  almost  sure 
to  be  trouble,  because  someone  must  of  necessity  assume  leadership,  and  too  often,  the  one  who  is 
least  qualified  to  do  this  feels  that  he  is  the  one  that  should  do  it.  The  success  of  the  business  de- 
pends upon  each  individual  partner  working  for  the  interest  of  the  business,  and  if  it  is  understood 
at  the  beginning  just  what  each  is  to  do,  there  can  be  no  misunderstanding. 

^  7.  Salaries.  As  a  general  rule,  no  partner  is  allowed  to  withdraw  any  part  of  his  invest- 
ment without  the  written  consent  of  the  other  partners.  If  a  partner  is  permitted  to  do  so,  this  con- 
dition should  be  specifically  stated.  Each  partner  is  usually  allowed  a  salary  for  his  services.  The 
amount  of  this  should  be  stated,  so  that  there  will  be  no  dispute.  This  is  a  very  important  .part 
of  the  agreement  and  can  not  be  made  too  clear. 

T[  8.  Division  of  the  Profits.  Unless  the  agreement  specifically  states  the  proportionate  part 
of  the  profit  each  partner  is  to  share,  the  court  will  assume  that  each  partner  is  to  have  an  equal  part. 
For  this  reason,  the  agreement  must  state  the  proportionate  part  of  the  profit  each  partner  is  to  re- 
ceive. 

^  9.  Special  Conditions.  The  partners  may  include  in  the  agreement  any  conditions  that  are 
not  contrary  to  law.  As  the  agreement  is  each  partner's  understanding  of  the  conditions  under  which 
the  partnership  is  to  exist,  everything  should  be  mentioned  so  that  there  will  be  no  occasion  for  a 
misunderstanding.  Each  partner  owes  it  to  the  business  to  see  that  he  does  not  become  involved 
in  his  own  private  affairs.  For  this  reason,  each  partner  should  agree  not  to  become  surety  for  any- 
one else,  or  engage  in  any  other  business.  Unless  these  features  are  included  in  the  agreement,  the  busi- 
ness may  be  seriously  affected  by  the  private  affairs  of  one  partner.  The  law  regards  the  interest 
of  each  partner  as  property  which  may  be  sold  to  pay  his  obligations,  no  matter  what  agreement 
he  may  have  with  others  regarding  this. 

§  149.  Bookkeeping  for  a  Partnership  does  not  differ  from  that  of  an  individual  unless  the 
nature  of  the  business  is  different.  The  investment  account  will  be  represented  by  two  or  more  in- 
dividual Capital  accounts  instead  of  one.  The  profits  are  shared  by  each  partner  according  to  the 
conditions  mentioned  in  the  agreement,  hence  the  Profit  and  Loss  account  is  closed  into  each 
partner's  Capital  account  instead  of  only  one  Capital  account.     It  is  good  policy  to  make  a  copy 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


131 


of  the  articles  of  agreement  in  the  journal  or  at  least  outline  the  important  features.  The  object 
of  this  is  to  prevent  disputes  among  partners.  Since  the  books  are  open  for  the  inspection  of  each 
partner,  if  an  outline  of  the  agreement  appears  in  the  journal,  neither  partner  can  claim  that  he 
did  not  understand  the  agreement. 

§  150.  Accounts  with  Partners.  It  is  necessary  to  keep  an  account  with  each  partner  to 
show  his  investments,  withdrawals  and  other  transactions  with  him.  The  nature  of  the  account  is 
exactly  the  same  as  that  with  an  individual  owner.  It  is  best  practice  to  keep  two  accounts,  one  des- 
ignated as  the  Partner's  Capital  account  and  the  other  his  Personal  account. 

PARTNER'S  CAPITAL  ACCOUNT. 

§  151.  The  Object  of  this  Account  is  to  show  the  amount  invested  at  the  beginning  of  the 
business,  subsequent  investments,  amounts  withdrawn  from  the  capital,  and  his  share  of  the  profit 
or  loss  at  the  close  of  the  fiscal  period. 


Debit  the  Partner's  Capital  Account: 

Tf  I.  For  debts  owed  by  him  at  the  beginning 
of  the  business  and  assumed  by  the 
business. 

^  2.  For  amounts  withdrawn  from  the  in- 
vestment. 

T[  3.  For  the  debit  excess  of  his  Personal 
account,  if  that  account  is  closed  into 
the  Capital  account. 

Tl  4.  For  his  share  of  the  loss  as  shown  by 
the  debit  excess  of  the  Profit  and  Loss 
account  at  the  close  of  the  fiscal  period. 


Credit  the  Partner's  Capital  Account: 

^  5.     For  his  investment  at  the  beginning   of 

the  business. 
T[  6.     For  all  subsequent  investments. 
^  7.     For    the    credit    excess    of    his    Personal 

account,   if  that  account  is  closed  into 

the  Capital  account. 
\  8.     For  his  share  of  the  net  profit  as  shown 

by  the  credit  excess  of  the  Profit  and 

Loss  account  at  the  close  of  the  fiscal 

period. 


^  9.  The  Balance  of  the  Partner's  Capital  Account  shows  the  net  amount  invested,  and  at  the  close 
of  the  fiscal  period,  after  the  books  have  been  closed  and  posted,  it  shows  his  "Present  Capital"  or 
interest  in  the  business.  It  appears  on  the  Financial  statement  as  a  part  of  the  difference  between 
the  resources  and  liabilities. 

If  10.  To  Close  the  Partner's  Capital  Account.  This  account  is  not  closed  until  all  the  other  ac- 
counts, required  to  be  closed  at  the  end  of  the  fiscal  period,  have  been  closed  into  the  Profit  and  Loss  ac- 
count and  that  account  closed.  (§  33.)  It  will  then  show  all  the  investments,  withdrawals,  etc.,  also 
his  share  of  the  net  profit  or  loss.  The  difiference  is  the  present  capital  and  is  entered  on  the  debit 
side  in  red  ink  as  follows:  the  date  of  closing;  the  words,  "Present  Capital;"  the  amount  of  the  dif- 
ference. The  account  is  ruled  with  single  and  double  red  lines,  footed  in  black  ink,  and  the  "Present 
Capital"  brought  down  on  the  credit  side  in  black  ink  under  date  of  the  day  following  the  closing. 


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Illustration  No.  47.     Partner's  Capital  Account. 


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7 


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132 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


PARTNER'S  PERSONAL  ACCOUNT. 

§  152.  As  Stated  in  §  148,  ^  7,  the  articles  of  agreement  should  show  the  amount  of  salary  or 
compensation  each  partner  is  to  receive  for  his  services.  This  may  be  withdrawn  at  the  same  time 
the  other  salaries  are  paid,  but  as  a  general  rule  it  is  withdrawn  as  the  partner  needs  it.  In  this  case, 
it  is  necessary  to  keep  an  account  with  him,  which  must  show  the  amount  of  his  salary  and  with- 
drawals. Sometimes  the  partners  will  agree  to  withdraw  a  certain  amount  of  the  net  profit  as  shown 
by  the  Financial,  and  Profit  and  Loss  statements  at  the  close  of  the  fiscal  period.  Any  amounts  that 
are  withdrawn  would  be  credited  to  this  account  and  not  to  the  Capital  account. 


Debit  the  Partner  s  Personal  Account: 


Credit   the   Partner' s   Personal   Account: 


^  5.     For  his  salary  at  the  end  of  each  month. 

T[  6.  For  any  amounts  paid  out  of  his  private 
funds  in  the  interest  of  the  firm. 

T[  7.  For  any  part  of  the  profit  to  be  with- 
drawn from  the  business. 

^  8.  For  the  debit  excess  of  this  account,  if 
it  is  closed  into  the  Capital  account. 


^  I.     For  all   amounts  withdrawn   which  may 

be    (a)    by   check   payable   to   himself; 

(b)    check    payable    to    someone    else, 

but  to  be  charged  to  him,  or  (c),  cur- 
rency taken  from  the  cash  register  or 

petty  cash  drawer. 
^  2.     For  any  property  taken  out  of  stock  for 

his    private    use,    usually    charged    at 

cost  price. 
•[[  3.     For  amounts  received  to  be  used  in  the 

interest  of  the  business. 
^  4.     For  the  credit  excess  of  this  account,  if 

it  is  closed  into  the  Capital  account. 

^  9.  The  Balance  of  the  Partner's  Personal  Account  is  a  resource  or  a  liability,  being  the  amount 
due  the  partner  for  services  rendered  or  due  the  business  on  account  of  overpayment.  If  the  debit 
side  is  the  larger,  it  is  a  resource  and  is  listed  with  the  resources  on  the  Financial  statement,  appear- 
ing after  all  the  active  resources  and  fixed  investments  have  been  entered.  If  the  credit  side  is  the 
larger,  it  is  a  liability  and  is  listed  among  the  liabilities  on  the  Financial  statement,  appearing  after 
all  obligations  due  outside  parties  have  been  listed. 

^10.  To  Close  the  Partner's  Personal  Account.  As  a  general  rule,  this  account  will  close  itself,  be- 
cause the  articles  of  agreement  usually  state  specifically  that  neither  partner  is  to  withdraw  more  than 
his  salary  or  that  part  of  the  profit  which  is  credited  to  his  account  to  be  withdrawn.  However,  there 
may  be  a  good  reason  for  closing  this  account  into  the  Partners'  Capital  account,  in  which  case  close 
as  follows:  Enter  on  the  smaller  side  in  red  ink  the  date  of  closing;  the  words,  "Capital  Account;" 
the  page  of  the  Capital  account;  the  amount  of  the  difference.  Rule  the  account  with  single  and 
double  red  lines;  foot  in  black  ink;  transfer  the  difference  in  black  ink  to  the  opposite  side  of  the  Cap- 
ital account. 


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13 


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Illustration  No.  48.     Partner's  Personal  Account. 


/0  6 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  133 

EXERCISES  IN  PARTNER'S  ACCOUNTS. 

The  following  exercises  are  given  to  familiarize  the  student  with  the  various  debits  and  credits 
in  Partner's  Personal  and  Capital  accounts,  as  outlined  in  §§  151  and  152  and  the  various  paragraphs 
under  them.  References  are  given  where  the  student  may  be  in  doubt  as  to  the  proper  account  to 
debit  or  credit.  These  exercises  are  to  be  worked  out  on  ledger  paper  and  presented  to  the  teacher 
for  approval.    Illustrations  Nos.  47  and  48  show  the  accounts  with  C.  W.  Keeland  in  Exercise  No.  43. 

EXERCISE  No.  43.  April  2d,  C.  W.  Keeland  and  A.  D.  Munson  form  a  partnership  for  the 
purpose  of  engaging  in  the  retail  hay,  grain,  feed  and  coal  business.  Each  partner  is  to  invest  an 
equal  amount  and  to  share  equally  the  profits  or  losses  and  to  receive  a  salary  of  $100.00  per  month. 

April  2d,  C.  W.  Keeland  invests  cash,  $1,500.00  (§  151,  ^  5);  A.  D.  Munson  invests  cash,  $1,500.00 
(§  151*  If  5);  nth,  C.  VV.  Keeland  withdraws  $35.00  (§  152,  ]f  i);  nth,  A.  D.  Munson  withdraws 
$25.00  (§  152,  ^  i);  2ist,  Keeland  and  Munson  each  withdraw  $25.00  (§  152,  ^  i);  30th,  both  part- 
ners are  credited  for  their  salaries  for  the  month.  (§  152,  ^  5.)  The  Financial  and  Profit  and  Loss 
statements  were  made  and  the  net  profit  found  to  be  $187.49,  and  each  Partner's  Capital  account 
is  credited  with  one-half  of  this  amount.     (§  151,  ^  8.) 

Rule  the  accounts  and  bring  down  the  Present  Capital  as  shown  in  illustration  No.  47.  Illustra- 
tion No.  48  shows  one  of  the  Personal  accounts. 

EXERCISE  No.  44.  H.  D.  Prick  and  C.  L.  Thomas  form  a  copartnership  for  the  purpose  of 
engaging  in  the  retail  drug  business.  Each  partner  is  to  invest  an  equal  amount  and  share  equally 
the  profits  or  losses  and  to  receive  a  salary  of  $100.00  per  month. 

April  1st,  H.  D.  Prick  invests  cash,  $2,000.00  (§  151,  ^5);  C.  L.  Thomas  invests  cash,  $2,000.00 
(§  151.  If  5);  9th,  Frick  withdraws  $25.00  (§  152,  Tf  i);  nth,  Thomas  withdraws  $15.00;  i6th,  Frick 
takes  merchandise  out  of  stock  valued  at  $24.85  (§  152,  ^2);  20th,  Thomas  takes  merchandise 
out  of  stock  valued  at  $10.50  (§  152,  T[  2) ;  25th,  Thomas  invests  $1,000.00  and  Frick  $900.00 
(§  151,  ^6);  27th,  Thomas  withdraws  $25.00;  28th,  Frick  withdraws  $10.00;  30th,  each  partner  is 
credited  for  his  salary  for  the  month. 

May  9th,  Frick  and  Thomas  each  withdraw  $300.00  from  the  amount  invested  (§  151,  ^  2) ;  12th, 
Frick  takes  merchandise  out  of  stock  valued  at  $16.50  (§  152,  Tf  2) ;  19th,  gave  Jones  Bros,  a  check 
for  $36.50  to  pay  an  account  owed  by  Thomas  (§  152,  ^  i);  20th,  Thomas  withdraws  $15.00;  Frick 
takes  merchandise  out  of  stock  valued  at  $12.80;  25th,  Thomas  takes  merchandise  out  of  stock  valued 
at  $18.65;  27th,  Thomas  and  Frick  each  withdraw  $30.00;  31st,  each  partner  is  credited  with  his  salary 
for  the  month  (§  152,  ^  5) ;  31st,  the  Financial,  and  Profit  and  Loss  statements  are  made  and  the  net 
profit  found  to  be  $826.92;  each  Partner's  Capital  account  is  credited  with  one-half  of  this. 

Foot  and  rule  the  accounts  and  bring  down  the  Present  Capital  as  shown  in  illustration  No.  47. 

EXERCISE  No.  45.  E.  E.  Admire,  J.  H.  Lanning  and  A.  B.  Johnston  form  a  copartnership 
for  the  purpose  of  engaging  in  the  retail  hardware  business.  Each  partner  is  to  invest  an  equal 
amount  and  the  profits  or  losses  are  to  be  shared  equally.  Each  is  to  receive  a  salary  of  $100.00 
per  month. 

July  1st,  E.  E.  Admire  invests  cash,  $2,000.00;  merchandise,  $1,865.40;  personal  accounts,  $269.50; 
notes  receivable,  $398.40  (§  151,  ^5).  J.  H.  Lanning  invests  cash,  $2,500.00;  real  estate,  $1,000.00; 
notes  receivable,  $850.70;  accounts  receivable,  $562.50  (§  151,  ^5).  The  firm  assumes  a  note  of 
$350.00,  which  he  owes  at  the  First  National  Bank  (§  151,  ^  i).  A.  B.  Johnston  invests  cash,  $3,000.00; 
notes  receivable,  $1,000.00;  accounts  receivable,  $500.00  (§  151,  ^5).  July  9th,  Admire  withdraws 
$10.00;  Johnston  takes  merchandise  out  of  stock  valued  at  $16.50;  14th,  Lanning  withdraws  $25.00; 
20th,  Admire  takes  merchandise  out  of  stock  valued  at  $19.50;  Lanning  withdraws  $25.00;  25th, 
Johnston  withdraws  $30.00;  26th,  Admire  takes  merchandise  from  stock  valued  at  $27,50;  28th, 
Lanning  withdraws  $15.00;  29th,  Johnston  takes  merchandise  from  stock,  $19.60;  31st,  each  partner 
is  credited  with  his  salary  for  the  month  (§  152,  ^  5). 

August  9th,  each  partner  withdraws  $300.00  from  the  amount  invested  (§  151,  ^  2);  nth,  Admire 
and  Johnston  each  withdraw  $25.00;  14th,  Lanning  withdraws  $50.00;  20th,  Admire  takes  merchan- 


134 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


dise  from  stock,  $16.75;  22d,  gave  Mace  &  Brown  a  check  for  $18.40  to  pay  an  account  owed  by  John- 
ston; 23d,  each  partner  invests  an  additional  $1,000.00  (§  151,  ^  6) ;  27th,  gave  S.  D.  Anderson  $25.00 
to  apply  on  an  account  owed  them  by  Admire;  28th,  each  partner  withdraws  $25.00;  31st,  the  Finan- 
cial and  Profit  and  Loss  statements  are  made  and  the  net  profit  found  to  be  $1,827.48;  each  Partner's 
Capital  account  is  credited  with  $500.00  (§  151,  ^  8)  of  this  and  his  Personal  account  with  the  bal- 
ance.    (§  152,  T[  7.) 

Foot  and  rule  each  account  and  bring  down  the  Present  Capital  as  shown  in  illustration  No.  47. 


QUESTIONS. 


(§  145.) 

of    a    partnership? 

of     a     partnership. 


1.  Define  partnership. 

2.  What    is    the    object 

(§  146.) 

3 .  Define     the     capital 

(§  I47-) 

4.  What    is    the    articles    of    copartnership? 

(§  148.) 

5.  What  is  meant  by  the  time?    (§  148,  ^  i.) 

6.  Can  the  partners  use  any  desired   name 

for  the  partnership?     (^  2,) 

7.  Name  an  exception.     (1[  2.) 

8.  Is  it  necessary  for  each  partner  to  invest 

an  equal  amount?     (^  3.) 

9.  What  is  meant  by  place  of  business?  (^  4.) 

10.  What  is  meant  by  the  nature  of  the  busi- 

ness?    (H  5.) 

11.  Why  should   the  duties 

be  mentioned  in  the 

12.  Why  should   the  salary 

be  mentioned  in  the 

13.  Why   should    the 

be  mentioned  in 


of  each 

contract? 

of  each 

contract? 

division   of   the 

the  contract? 


partner 

(116.) 

partner 

(1[7.) 
profits 

(1[8.) 


14. 


15- 


16. 


17. 
18. 
19. 
20. 
21. 


22. 

23- 
24. 


Name    some    special  conditions  that  it  is 
well  to  include  in  the  agreement.     (^  9.) 
What  is  the    difference  between    keeping 
books  for  a  partnership  and  for  an  in- 
dividual?    (§  149.) 
Why  is  it  best  to  keep  a  separate  account 
for   each    partner   for   the    amount   in- 
vested?    (§  150.) 
Define  Partner's  Capital  account.  (§  151.) 
Name  the  four  debits.   (§151,^^1-4.) 
Name    the    four   credits.    (§  I5i,111[  5-8.) 
Define  Partner's  Personal  account.   (§  152.) 
Is  it  necessary  to  keep  a  personal  account 
with  each  partner  when   his  salary  is 
paid  at  the  same  time  other  employees 
receive    theirs    and    the    net    profit    is 
closed  into  his  capital  account?   (§  152.) 
Name  three  debits  relative  to  the  Partner's 
Personal  account.     (§  152,  ^^1-4.) 
Name  the  four  credits.    (^^  5-8.) 
When    is    a    Partner's    Personal    account 
closed?     (§  152.^) 


SPECIAL  ACCOUNTS  WITH  MERCHANDISE. 


§  153.  As  Stated  in  §  31,  it  is  not  the  best  practice  to  keep  only  one  account  with  merchandise 
and  debit  and  credit  it  as  explained  in  If  If  i — 7,  under  that  section.  As  many  bookkeepers  keep  only 
one  account,  it  was  deemed  best  to  explain  the  method  of  keeping  the  merchandise  account  under 
such  conditions.  When  only  one  account  is  kept,  it  is  necessary  to  indicate  in  the  explanation  col- 
umns the  reason  for  each  amount  debited  and  credited,  otherwise  the  bookkeeper  will  have  to  refer 
to  the  book  of  original  entry  when  he  makes  the  Profit  and  Loss  statement.  The  best  results  are 
obtained  when  the  following  accounts  are  kept:  Purchases,  Sales,  Inventory,  Freight  In,  Purchases 
Discount,  and  Sales  Discount. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


135 


PURCHASES  ACCOUNT. 

§  154.    The  Object  of  this  Account  is  to  show  the  invoice  cost  of  merchandise  received,  and 
any  subsequent  charges  that  increase  this  cost,  unless  special  accounts  are  kept  with  these  charges. 


Debit    Purchases    Account: 

^  I.  For  the  cost  of  all  merchandise  pur- 
chased for  the  purpose  of  sale.  This  is 
represented  by  each  purchase,  or  the 
totals  of  the  purchases  book  and  the 
purchases  column  in  the  cash  book. 

^  2.  For  the  cost  of  all  freight  on  this  mer- 
chandise, unless  an  account  is  kept 
with  Freight  In.     (§  156.) 

^  3.  For  any  additional  cost  of  merchandise 
such  as  drayage  from  the  freight  sta- 
tion to  the  warehouse,  or  charges  made 
'  necessary  in  order  to  place  the  mer- 
chandise on  sale,  unless  an  account  is 
kept  with  Drayage. 


Credit    Purchases    Account: 

H  4.  For  the  cost  of  all  goods  returned  by  us 
to  the  seller  for  credit. 

T[  5.  For  all  rebates  or  allowance  made  by 
the  seller  to  us  for  damaged  goods, 
shortages,  or  overcharges,  if  the  full 
amount  was  charged  and  no  special 
account  kept  with  Rebates  and  Returns. 
(These  credits  are  usually  represented 
by  a  credit  bill  (§  205.)  sent  to  us.) 

*  ^  6.  For  deductions  allowed  us  for  prompt 
payment  as  indicated  by  the  terms  of  the 
invoice,  unless  a  special  account  is 
kept  with  Purchases  Discount.    (§  159,) 

^  7.  For  the  value  of  goods  taken  from 
stock  by  a  partner,  if  charged  at  cost 
price. 

T[  8.  For  the  value  of  goods  shipped  on  con- 
signment, (§  218.)  if  charged  at  cost  price. 

*NOTE. — Some  accountants  consider  deductions  for  prompt  payment^as  interest  on  the  capital  invested  and  not 
as  a  reduction  of  the  cost  of  merchandise  purchased.  This  is  a  question  to  bedecided  bvj  those  interested  and  the  con- 
ditions under  which  the  business  is  being  conducted. 

^  9.  The  Difference  between  the  two  sides  of  this  Account,  at  any  time  other  than  the  close  of 
the  fiscal  period,  represents  the  net  cost  of  the  goods  purchased  since  the  beginning  of  the  present 
fiscal  period.  It  is  not  a  resource  if  part  of  the  goods  have  been  sold,  which  is  usually  the  case.  It  is 
necessary  to  take  stock  to  ascertain  the  present  value  of  the  goods  on  hand.  The  Purchases  account 
and  the  present  inventory  are  both  used  in  making  the  Trading  statement. 

^10.  To  Close  the  Purchases  Account.  The  difference  of  this  account  will  always  be  a  debit  bal- 
ance, and  is  closed  into  the  Trading  account.  If  special  accounts  are  kept  with  the  cost  of  freight  and 
the  cost  of  drayage  and  other  charges  (^^  2  and  3),  the  difference  will  show  the  invoice  cost  of  goods 
purchased.  If  all  charges  are  made  direct  to  the  Purchases  account,  the  difference  will  show  the  total 
cost  of  goods  purchased.  The  nature  of  the  business  will  determine  the  best  practice  for  keeping 
these  accounts.  After  the  Trading  statement  has  been  made  and  proved  to  be  correct  by  the  Profit 
and  Loss,  and  Financial  statements,  the  difference  of  the  Purchases  account  is  closed  into  the  Trad- 
ing account  by  a  journal  entry.  When  the  entry  in  the  journal  is  posted,  the  account  will  balance 
and  is  ruled  with  single  and  double  red  lines  and  the  totals  entered  in  black  ink.  If  there  is  but 
one  entry  on  each  side,  double  lines  only  may  be  used. 


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lustration  No.  49. 


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Purchases  Account. 


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136 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


SALES  ACCOUNT. 

§  155.  The  Object  of  this  Account  is  to  show  the  amounts  received  from  sales  of  merchandise. 
Usually  only  one  account  is  kept  with  sales,  but  if  it  is  desired  to  know  the  sales  from  different  de- 
partments, a  separate  account  must  be  kept  with  each. 


Credit  the  Sales  Account. 

^  5.  For  (a)  each  cash  or  credit  sale,  or  (b) 
at  the  end  of  the  month  for  the  total 
cash  sales,  as  shown  by  the  "Sales" 
column  in  the  cash  book,  and  the  credit 
sales  as  shown  by  the  total  of  the  sales 
book. 

^  6.  For  amount  of  errors  in  shipping  when 
a  customer  receives  more  merchandise 
than  was  chargjed  to  him. 


Debit  the  Sales  Account: 

^  I.  For  the  selling  price  of  all  merchandise 
returned  by  customers  for  credit. 

^  2.  For  rebates  allowed  by  us  on  account  of 
damaged  goods,  overcharges  or  shortages, 
if  the  full  amount  is  credited  to  the 
Sales  account,  unless  a  special  account 
is  kept  with  Rebates  and  Returns. 

*^  3.  For  deductions  allowed  for  prompt  pay- 
ment of  amounts  due  from  customers, 
as  indicated  by  the  terms,  unless  a 
special  account  is  kept  with  Sales  Dis- 
count.    (§  160.) 

^  4.     For  amount  of  errors  made  in  shipping 

when  a  customer  is  charged  with  goods 

he  does  not  receive. 

*NOTE. — Some  accountants  consider  deductions  made  by  customers  as  an  interest  charge  against  the  capital  invested 
and  not  a  reduction  in  the  returns  from  sales.  This  is  a  question  that  must  be  decided  by  those  interested  and  the 
conditions  under  which  the  business  is  being  conducted. 

^  7.  The  Difference  between  the  two  sides  of  this  Account  will  be  a  credit  and  represents  the  net 
sales  from  the  beginning  of  the  current  fiscal  period.     It  is  used  in  making  the  Trading  statement. 

f  8.  To  Close  the  Sales  Account.  The  credit  side  of  this  account  will  always  be  the  larger  and 
represents  the  net  sales.  After  the  Trading  statement  has  been  made  and  proved  to  be  correct  by  the 
Profit  and  Loss,  and  Financial  statements,  the  balance  of  this  account  is  closed  into  the  Trading  account 
by  a  journal  entry.  When  this  entry  is  posted,  the  account  will  balance  and  is  ruled  with  single  and 
double  red  lines  and  footed   in  black  ink. 


30 


^ 


^ 


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f^7 


u  / 


f^7 


J^ 


Illustration  No.  50.     Sales  Account. 

FREIGHT  IN  ACCOUNT. 

§  156.  Freight  Paid  on  Goods  Purchased  for  sale  is  a  part  of  the  cost  of  these  goods,  and 
must  be  considered  as  such  in  estimating  the  selling  price.  Amounts  paid  for  freight  may  be  charged 
direct  to  the  Purchases  account  or  to  a  special  Freight  In  account.  As  mistakes  will  occur  in  ren- 
dering freight  bills,  it  is  best  practice  to  keep  a  separate  account,  so  that  rebates  for  freight  may  be 
credited  to  this  account  and  the  difference  will  show  the  net  amount  paid  for  freight.  Freight  paid 
on  goods  purchased  is  entirely  different  from  that  paid  on  goods  delivered  to  customers  (Freight 
Out,  §259),  and  these  amounts  must  be  represented  by  separate  accounts;  one  represents  a  part  of 
the  cost  of  goods  purchased,  and  the  other  a  part  of  the  selling  expense. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


137 


Debit  the  Freight  In  Account: 

T[  I.     For  all  amounts  paid  for  freight  on  mer-  ^2. 

chandise  purchased  for  sale.  This  in- 
cludes freight  prepaid  and  charged  on 
the  invoice.  ^  3. 


Credit  the  Freight  In  Account: 

For  any  rebates  allowed  for  overcharges 
on  freight  if  the  amount  was  charged 
to  this  account. 

For  any  amount  that  reduces  the  cost 
of  freight. 


^  4.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  amount  paid  for  freight 
and  increases  the  cost  of  merchandise  that  amount.  It  appears  on  the  Trading  statement  as  a  part 
of  the  cost  of  the  goods  purchased. 

T[  5.  To  Close  the  Freight  In  Account.  After  the  Trading  statement  has  been  made  and  proved  to 
be  correct  by  the  Profit  and  Loss,  and  Financial  statements,  the  difference  of  this  account  is  closed 
into  the  Trading  account  by  a  journal  entry.  When  this  entry  is  posted,  the  account  will  balance 
and  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink. 


Illustration  No.  51.     Freight  In  Account. 


INVENTORY  ACCOUNT. 


§  157.  The  Object  of  this  Account  is  to  show  the  value  of  goods  on  hand  at  the  beginning 
of  the  fiscal  period.  The  account  is  necessary  when  separate  accounts  are  kept  with  Purchases  and 
Sales. 


Debit  the  Inventory  Account: 

T[  I.  For  the  value  of  salable  merchandise  on 
hand  at  the  beginning  of  the  business. 

^  2.  For  the  value  of  salable  merchandise  on 
hand  at  the  end  of  the  current  fiscal 
period. 


Credit  the  Inventory  Account: 

^3.  At  the  close  of  each  fiscal  period  with 
the  cost  of  salable  merchandise  on 
hand  at  the  beginning  of  the  period. 
(This  is  the  same  credit  as  the  debit 
described  in  ^  i.) 


^  4.  The  Difference  between  the  two  sides  of  this  Account  shows  the  value  of  goods  on  hand  at  the 
beginning  of  the  fiscal  period,  and  corresponds  to  the  amount  of  goods  on  hand  as  shown  by  the  last 
inventory.  It  is  used  in  making  the  Trading  statement,  and  is  added  to  the  net  cost  of  goods  purchased 
to  show  the  total  cost. 

^  5.  To  Close  the  Inventory  Account.  After  the  Trading  statement  has  been  made  and  proved  to 
be  correct  by  the  Profit  and  Loss,  and  Financial  statements,  the  accounts  affecting  the  Trading  state- 
ment are  closed  into  the  Trading  account  by  a  journal  entry.  When  this  is  posted,  the  amount  with 
which  the  Inventory  account  is  credited  will  be  the  same  as  that  with  which  it  was  debited  at  the 
end  of  the  previous  fiscal  period  and  will  balance.  It  is  ruled  by  drawing  double  red  lines  across  all 
columns  except  the  explanation  columns.     (See  Note,  page  138.) 


138 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


The  inventory  at  the  end  of  the  current  fiscal  period  is  used  in  making  the  Trading  statement. 
When  the  journal  entry,  to  close  the  Trading  account  (§  200,  ^  i),  is  made,  the  Inventory  account 
js  debited  for  the  value  of  the  present  inventory,  this  debit  being  entered  below  the  ruled  lines.  Thus 
^fter  the  ledger  is  closed  this  account  shows  the  present  inventory. 


:?9» 


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Illustration  No.  52.     Inventory  Account. 


NOTE. — When  accounts  other  than  personal  accounts  have  only  one  amount  on  each  side,  the  sinpjle  line  may  be 
omitted  in  closing  as  there  are  no  footings  to  enter. 

MERCHANDISE  DISCOUNT. 

§  158.  It  is  Customary  in  Business  to  allow  a  special  discount  for  prompt  payment  of  long- 
time purchases  or  sales.  This  discount  is  indicated  in  the  terms  of  the  invoice  or  bill  (§  187).  This 
discount  is  usually  termed  "Merchandise  Discount,"  to  distinguish  it  from  interest  paid  in  advance, 
which  is  sometimes  termed  "Discount." 

Discount  deducted  for  prompt  payment  may  be  considered  as  reducing  the  cost  of  merchan- 
dise purchased, or  the  returns  from  sales  of  merchandise;  or  as  affecting  the  capital  invested.  This 
question  must  be  decided  by  those  interested  or  the  conditions  under  which  the  business  is  being  con- 
ducted. In  this  set,  deductions  for  prompt  payment  will  be  considered  as  reducing  the  cost  of  mer- 
chandise purchased  or  the  returns  from  sales. 

One  account  may  be  kept  with  discounts  deducted  by  the  business  for  prompt  payment  of  obli- 
gations, and  those  allowed  to  customers  on  bills;  but  it  is  the  best  practice  to  keep  two  separate  ac- 
counts. When  this  is  done,  the  discount  deducted  by  the  business  is  termed  "Purchases  Discount" 
and  that  allowed  to  customers,  "Sales  Discount." 

PURCHASES  DISCOUNT  ACCOUNT. 

§  159.  The  Object  of  this  Account  is  to  keep  a  record  of  all  deductions  made  for  prompt  pay- 
ment of  obligations  owed  by  the  business.  These  deductions  are  made  according  to  the  terms  on 
the  invoices.     (§  187.) 


Debit  the  Purchases  Discount  Account: 


Credit  the  Purchases  Discount  Account: 


\  I.     For  the  amount  of  an  error  in  our  favor 

made  by  us  in  deducting  discount  and 

afterwards  reported. 

^  2.     For  the  amount  of  discount  deducted  by 

us  and  not  allowed  by  the  person  or 

firm  to  whom  the  remittance  is  sent. 


^  3.  For  the  difference  between  the  face  of 
the  invoice  and  the  amount  of  our 
check  when  the  deduction  is  made, 
according  to  terms  of  the  invoice.  (If 
a  special  column  is  provided  in  the  cash 
book,  the  total  is  posted  at  the  end  of 
the  month.) 


^  4.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  amount  of  discount  de- 
ducted for  prompt  payment  of  obligations.  It  is  used  in  making  the  Trading  statement,  and  is  de- 
ducted from  the  cost  of  merchandise  purchased  to  ascertain  the  net  cost  of  merchandise. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


139 


^  5.  To  Close  the  Purchases  Discount  Account.  This  account  is  not  closed  until  the  end  of  the  fiscal 
period,  and  after  the  Profit  and  Loss  statement  has  been  made  and  proved  to  be  correct  by  the  Finan- 
cial statement.  When  the  journal  entry,  to  close  the  Trading  account,  is  made  and  posted,  this  ac- 
count will  balance.     It  is  ruled  with  single  and  double  red  lines  and  footed  with  black  ink. 


/^/ 


30 


^. 


'^-^^fC^^U^i-z^  ^^   Q.  ^ 


Illustration  No.  53.     Purchases  Discount  Account. 

SALES  DISCOUNT  ACCOUNT. 

§  160.    The  Object  of  this  Account  is  to  keep  a  record  of  all  discounts  deducted  by  customers 
for  prompt  payment  of  bills  purchased,  as  indicated  by  the  terms  of  the  bill. 


Credit  Sales  Discount  Account: 

For  an  error  made  by  a  customer  in  his 
favor  in  deducting  the  discount,  when 
the  error  is  not  discovered  until  after 
the  credit  has  been  allowed. 


Debit  Sales  Discount  Account: 

^  I.     With  the  difference  between  the  amount  ^2. 

of  the  remittance  received  from  a 
customer  and  the  face  of  the  bill,  when 
this  remittance  is  accepted  for  full 
payment  of  the  bill  as  indicated  by 
the  terms.  (See  §  188.)  (If  a  special 
column  is  provided  in  the  cash  book, 
the  total  is  posted  at  the  end  of  the 
month.) 

^  3.  The  Difference  of  this  Account  shows  the  net  amount  of  discount  allowed  customers  for 
prompt  payment  of  goods  purchased.  The  debit  side  is  the  larger.  It  is  used  in  making  the  Trading 
statement,  and  is  deducted  from  the  gross  sales  to  determine  the  net  returns  from  merchandise  sold. 

^  4.  To  Close  the  Sales  Discount  Account.  This  account  is  not  closed  until  the  end  of  the  fiscal 
period,  and  after  the  Trading  statement  has  been  made  and  proved  to  be  correct  by  the  Financial,  and 
Profit  and  Loss  statements.  When  the  journal  entry,  to  close  the  Trading  account  (§  200,  ^  i),  is 
made  and  posted,  this  account  will  balance.  It  is  then  ruled  with  single  and  double  red  lines,  and 
footed  in  black  ink. 


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I40  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

EXERCISES  IN  MERCHANDISE  ACCOUNTS. 

The  following  exercises  are  given  to  the  student  to  illustrate  the'various  debits  and  credits  as 
outlined  in  §§  154,  155,  156,  157,  159  and  160  and  the  various  paragraphs  under  each.  Reference  is  given 
where  the  student  may  be  in  doubt  as  to  the  proper  account  to  debit  or  credit.  These  exercises  are 
to  be  worked  out  on  ledger  paper  and  approved  by  the  teacher.  Each  exercise  will  require  four  or 
five  accounts. 

EXERCISE  No.  46.  April  2d,  paid  freight  on  goods  purchased,  $208.80  (§  156,  ^  i);  13th, 
paid  freight  on  goods  purchased,  $457.74;  27th,  received  credit  for  $17.20,  discount  on  draft 
drawn  for  goods  purchased  (§  159,  ^3);  30th,  paid  freight  on  goods  purchased,  $567.43;  30th 
total  purchases  discount,  per  purchases  discount  column  in  the  cash  book,  $27.45  (§  I59>1[3);  30th, 
cash  sales  for  the  month,  per  sales  column  in  the  cash  book,  $1,287.50  (§  155,  ^  5);  30th,  credit  sales, 
per  sales  book,  $2,908.21  (§  155, T[  5);  30th,  credit  purchases,  per  purchases  book,  $5,125.83  (§  i54,Tf  i). 

Foot  and  rule  each  account.  Enter  the  balance  on  the  smaller  side  and  write  with  black  ink  in 
the  explanation  column  "Trading  Account,"  as  the  balance  of  each  of  these  accounts  is  closed  into 
the  Trading  account  by  a  journal  entry.     See  illustrations  Nos.  49,  50,  51  and  53. 

EXERCISE  No.  47.  January  2d,  merchandise  on  hand,  $5,627.85  (§  157,  T[  i);  3d,  bought  on 
account,  $396.35  (§  I54.  H  i);  5th,  sold  on  account,  $162.95  (§  155,  ^5);  6th,  sold  for  cash,  $236.95 
(§  155.  1  5);  7th,  bought  for  cash,  $397-62  (§  154,  ^  i);  7th,  paid  freight  on  goods  purchased,  $45.60 
(§  156,  H  i);  loth,  returned  a  part  of  goods  purchased  and  received  credit  for  $56.29  (§  154,  ^  4)  I 
I2th,  a  customer  returned  a  part  of  goods  sold  him  and  we  gave  him  credit  for  $10.65  (§  I55»  H  i): 
13th,  deducted  $13.50  from  an  invoice  due  a  creditor  for  prompt  payment  (§  159,  T[  3) ;  13th,  sold 
on  account,  $427.65;  14th,  sold  for  cash,  $469.52;  15th,  bought  on  account,  $927.65;  15th,  paid  freight 
on  goods  purchased,  $29.85  (§  156,  ^  i);  i6th,  allowed  a  customer  credit  of  $18.65  for  overcharge 
on  a  sale  (§  155,  ^  2) ;  i8th,  bought  on  account,  $216.75;  iQth,  paid  freight  on  goods  purchased,  $16.50; 
2ist,  bought  for  cash,  $219.27;  23d,  sold  on  account,  $565.92;  23d,  bought  for  cash,  $156.97;  28th, 
returned  goods  to  a  creditor  and  received  credit  for  $41.27  (§  154,  ^4);  30th,  sold  for  cash,  $327.65. 

February  9th,  purchased  on  account,  $219.65;  9th,  sold  on  account,  $327.65;  14th,  sold  for  cash, 
$156.90;  i6th,  paid  freight  on  goods  purchased,  $72.65;  i8th,  bought  on  account,  $250.12;  19th, 
shipped  for  sale  on  consignment,  $150.70  (§  154,  ^[8);  19th,  allowed  a  customer  credit  of  $25.60 
for  goods  returned  (§  155,  ^  i);  21st,  deducted  $12.50  from  an  invoice  paid  to  a  creditor  for  prompt 
payment  (§  159,  *[[  3) ;  22d,  sold  on  account,  $216.25;  23d,  purchased  on  account,  $429.80;  23d,  al- 
lowed a  customer  a  discount  of  $16.80  for  prompt  payment  of  a  bill  (§  160,  ^  l) ;  24th,  sold  on  account, 
$209.12;  24th,  allowed  a  customer  credit  of  $16.37  for  an  overcharge  (§  155,  ^2);  25th,  purchased  on 
account,  $508.12;  26th,  sold  for  cash,  $426.90;  27th,  allowed  a  customer  a  discount  of  $5.90  for  prompt 
payment  of  a  bill;  27th,  returned  goods  purchased  and  was  allowed  a  credit  for  their  value,  $19.55; 
28th,  allowed  a  customer  a  credit  of  $14.20  for  goods  returned  by  him;  28th,  shipped  for  sale  on  con- 
signment, $195.50  (§  154,  ^  8);  28th,  deducted  $14.29,  discount  on  an  invoice  due  a  creditor;  28th, 
merchandise  on  hand,  $5,681.37   (§  157,  ^2). 

Foot  and  rule  each  account.  Enter  the  balance  on  the  smaller  side  and  write  with  black  ink  in 
the  explanation  column  "Trading  Account"  (Inventory  account  excepted,  illustration  No.  52),  as 
the  balance  of  each  of  these  accounts  is  closed  into  the  Trading  account  by  a  journal  entry. 

EXERCISE  No.  48.  September  1st,  inventory,  $16,427.95  (§  157,  ^  i);  i6th,  paid  freight  on 
goods  purchased,  $1,462.79  (§  156,  ^  i);  30th,  paid  freight  on  goods  purchased,  $1,072.45;  30th,  cash 
sales  for  the  month  per  sales  column  in  the  cash  book,  $3,624.78  (§  155,  T[  5);  30th,  credit  sales,  per 
sales  book,  $9,479.21  (§  155,  ^  5);  30th,  total  purchases,  per  purchases  book,  $4,629.87  (§  154,  ^  i). 

October  5th,  deducted  discount  from  an  invoice  purchased,  $86.27;  9th,  returned  part  of  goods 
purchased  and  received  credit  for  $142.87;  12th,  allowed  a  customer  a  discount  of  $26.75  foK  prompt 
payment  of  a  bill;  13th,  a  customer  returned  a  part  of  goods  sold  him  and  we  allowed  him  credit  for 
>.82;   15th,  paid   freight  bills  for  goods  purchased,  $1,862.75;  20th,  deducted  discount  from  an 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


141 


invoice  purchased  as  per  terms  of  the  bill,  $72.56;  21st,  a  customer  reports  a  part  of  goods  sold  him 
not  as  good  as  sample  and  we  allowed  him  a  credit  of  $27.84;  24th,  we  returned  a  part  of  goods 
purchased  and  are  allowed  a  credit  of  $109.34  (§  I54»  114);  25th,  a  creditor  notified  us  that  there 
was  a  mistake  in  our  calculations  of  deducting  discount  and  states  that  our  account  has  been 
debited  with  $10.00,  the  amount  of  error  (§  159,  ^  i);  26th  received  $9.72  from  the  railroad  com- 
pany for  an  error  in  a  freight  bill  (§  156,  ^2);  27th,  a  customer  deducted  $18.75  discount  for 
prompt  payment  of  a  bill  as  per  terms;  28th,  a  customer  returns  a  part  of  goods  sold  him  and 
is  given  credit  for  $57.82;  we  deduct  $61.85  discount  from  an  invoice  paid  as  per  terms  of  the 
invoice;  30th,  we  have  just  discovered  that  a  customer  made  a  mistake  in  calculating  discount  and 
have  charged  his  account  with  $3.50,  the  amount  of  the  error  (§  160,  ^  2);  31st,  shipped  on  consign- 
ment (cost  price),  $280.50  (§  154,  ^[8);  31st,  paid  freight  bills  on  goods,  $1,627.92;  31st,  cash  sales, 
per  sales  column  in  the  cash  book,  $4,592,81 ;  credit  sales,  per  sales  book,  $10,627.45;  31st,  cash  pur- 
chases, per  purchases  column  in  the  cash  book,  $3,629.87;  31st,  total  purchases,  per  purchases  book, 
$9,762.98;  31st,  merchandise  on  hand,  as  per  inventory,  $14,693.21   (§  157,  ^2). 

Foot  and  rule  each  account  and  enter  the  balance  on  the  smaller  side  and  write  in  the  explana- 
tion column  "Trading  Account,"  as  the  balance  of  each  of  these  accounts  is  closed  into  the  Trading 
account  by  a  journal  entry. 

QUESTIONS. 


2- 

3- 


10, 


II. 


What  is  meant  by  special  accounts  with 

merchandise?      (§  153.) 
Define    Purchases   account.      (§  154.) 
What  is  the  invoice  cost  of  merchandise? 

(§  154.    II  !•) 

Why  is  freight  charges  on  goods  pur- 
chased a  part  of  the  cost  price?    (§  154, 

1l2.)_ 

What  is  the  gross  cost  of  goods  pur- 
chased?    (§  154,  Tf^  1—3.) 

If  merchandise  is  returned  to  the  person 
from  whom  it  was  purchased,  what  ac- 
count is  credited?    Why?  (§  154,  ^  4.) 

Why  are  rebates  and  shortages  of  mer- 
chandise purchased  credited  to  the 
Purchases  account?      (§  154,   ^5.) 

Why  does  discount  for  prompt  payment 
of  invoices  reduce  the  cost  of  goods 
purchased?     (§  154,  T[  6.) 

When  a  partner  takes  goods  out  of  stock 
at  cost  price,  what  account  is  credited? 

(§  154,  H  7.) 

Why  is  the  Purchases   account  credited? 

(§  154.  H  7-) 
When    goods    are    shipped    on    consign- 
ment, what  account  is  credited?  (§  154, 

US.) 


12. 

13- 
14. 

15- 
16. 

17- 
18. 

19. 
20. 


21. 


22. 

23- 
24. 

25- 

26. 
27. 
28. 
29. 


Define  the  Sales  account.      (§  155.) 
Name  the  four  debits.     (§  155,  ^^  i — 4.) 
Name  the  two  credits.    (§  155,  ^^  5  and  6.) 
Define  the  Freight  In  account.      (§  156.) 
For  what  is  this  account  debited?     (§  156, 

Hi-) 
For  what  is  it  credited?     (§  156,  ^f  2.) 
Give  a  practical  example  of  a  credit  to 

this  account. 
Define  Inventory  account.     (§  157.) 
What  is  meant  by  cost  of  goods  on  hand 

at  the  beginning  of  the  fiscal  period? 

(§157,  If  I.) 
What  is  meant  by  the  cost  of  goods  on 
hand  at  the  end  of  the  fiscal  period? 

(§157,  II  2.) 
For  what  is  the  Inventory  account  cred- 
ited?    (§  157,  1l3-) 
What  is  meant  by  merchandise  discount? 

(§  158.) 
Define  Purchases  Discount  account.  (§159.) 
For  what  is  it  debited?     (§  159,  ^T[i,  2.) 
For  what  is  it  credited?     (§  159,  ^3,) 
Define  Sales  Discount  account.     (§  160.) 
For  what  is  it  debited?     (§  160,  ^  i.) 
For  what  is  it  credited?     (§  160,  T[  2.) 


142 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


SPECIAL  ACCOUNTS  WITH  FIXED  INVESTMENTS. 

§  161.  As  Explained  in  §  21,  ^  2,  it  is  necessary  to  purchase  certain  property  for  use  in  the  busi- 
ness. The  nature  of  this  property  determines  the  name  of  the  account.  In  this  set,  the  student  will 
have  three  different  kinds  of  property  purchased  for  uSe  in  the  business  and  will  keep  three  accounts 
as  follows:     Office  Equipment,  Store  Fixtures,  and  Delivery  Equipment. 

There  are  two  methods  of  keeping  these  accounts:  One  is  explained  in  §  122,  ^^  i — 5,  and  il- 
lustrated in  the  preceding  set;  the  other  is  explained  in  §§  162 — 167,  and  illustrated  in  this  set. 

OFFICE  EQUIPMENT  ACCOUNT. 

§  162.  The  Object  of  this  Account  is  to  keep  a  record  of  the  cost  of  property  purchased  for 
use  in  the  office,  and  it  includes  all  office  furniture,  such  as  desks,  typewriters,  safes,  files,  bookcases, 
chairs,  tables,  etc. 


Debit  Office  Equipment  Account: 

^  I.     For  the  cost  value  of  any  office  furniture  ^  3. 

on  hand  at  the  beginning  of  the  busi- 
ness. 

^  2.     For  the  cost  value  of  any  office  furniture 
purchased     during    the     fiscal     period, 
whether  for  new  equipment  or  to  re- 
place some  equipment  that  has  become  ^  4. 
useless. 


Credit  Office  Equipment  Account: 

For  the  cost  price  of  any  property  sold, 
the  value  of  which  was  charged  to  this 
account.  (If  the  selling  price  is  less 
than  the  cost,  the  difference  is  charged 
to  the  Reserve  for  Depreciation  ac- 
count.) 

For  the  cost  of  any  article  replaced, 
destroyed  or  discarded.  (At  the  same 
time  debit  the  Reserve  for  Deprecia- 
tion account.) 


^  5.  The  Balance  of  this  Account  should  at  all  times  show  the  cost  value  of  the  office  equipment 
on  hand.     It  appears  on  the  Financial  statement  after  the  active  resources  have  been  listed. 

^  6.  To  Close  the  Office  Equipment  Account.  This  account  is  not  closed  unless  it  is  desired  to  trans- 
fer the  balance  to  a  new  page  or  bring  it  down  on  the  same  page.  When  closed  under  these  conditions, 
the  balance  is  entered  on  the  credit  side  with  red  ink  under  date  of  closing,  the  word  "Balance" 
being  written  in  the  explanation  column.  The  account  is  ruled  with  single  and  double  red  lines, 
footed  in  black  ink,  and  the  balance  brought  down  on  the  debit  side,  or  transferred  to  a  new  page, 
under  date  of  the  day  following  the  closing,  this  entry  being  made  in  black  ink. 


':><^>i'€yi^^2y7^9'Z^^-y^'^ 


^f/ 


'^.^t-^Zyt^^'OC-C^-^-fl.'' 


C3 


3^0 


X3 

2-0  o 


/  6 
4/  i    t 


^O 


^\5^  o 


Illustration  No.  55.     Office  Equipment  Account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


143 


RESERVE  FOR  DEPRECIATION  OF  OFFICE  EQUIPMENT  ACCOUNT. 

§  163.  The  Object  of  this  Account  is  to  provide  a  reserve  fund  to  replace  the  property  when 
it  has  become  useless,  as  all  property  purchased  for  use  will  decrease  in  value  on  account  of  its  being 
used.  If  some  provision  is  not  made  for  this  decrease  in  value  at  the  end  of  each  fiscal  period,  the  true 
loss  or  gain  will  not  be  shown.  The  amount  that  the  property  decreases  in  value  depends  largely  on 
the  use  of  the  property,  and  will  have  to  be  determined  by  those  interested  in  the  business.  When 
this  amount  has  been  determined,  the  Reserve  for  Depreciation  account  is  credited,  and  the  difference 
of  the  Property  account,  less  the  balance  of  the  Depreciation  account,  will  show  the  actual  present 
value  of  the  property. 


Credit    Reserve   for    Depreciation    Account: 

T[  4.  At  the  close  of  each  fiscal  period  with 
the  amount  of  depreciation  as  desig- 
nated by  those  interested  in  the  busi- 
ness. (The  General  Administrative 
Expense  account  is  charged  with  tliis 
depreciation,  because  the  amount  of 
the  expense  has  been  increased  by  us- 
ing the  property.) 
See  note  at  bottom  of  page. 


Debit    Reserve    for    Depreciation    Account: 

\  I.  With  the  cost  of  any  article  charged  to 
the  Office  Equipment  and  subsequently 
replaced. 

^  2.  With  the  difference  between  the  cost  and 
selling  price  of  any  article  sold  or  ex- 
changed, the  value  of  which  was 
charged  to  the  Office  Equipment  ac- 
count at  the  time  of  the  purchase. 

^  3.  With  the  cost  of  any  article  debited  to 
the  Office  Equipment  account  and 
subsequently    destroyed    or    discarded. 

^  5.  The  Balance  of  this  Account  will  show  the  net  amount  reserved  for  depreciation  of  office 
equipment.  It  is  deducted]^from  the  cost  price  of  the  office  equipment,  as  shown  by  the  balance  of 
that  account,  this  deduction  being  made  on  the  Financial  statement. 

^  6.  To  Close  the  Reserve  for  Depreciation  of  Office  Equipment  Account.  This  account  is  not  closed 
unless  it  is  desired  to  bring  the  balance  down  or  transfer  it  to  a  new  page.  When  closed  under  these 
conditions,  the  balance  is  entered  with  red  ink  on  the  debit  side  under  date  of  closing,  the  word  "Bal- 
ance" being  written  in  the  explanation  column.  The  account  is  then  ruled  with  single  and  double 
red  lines,  footed  in  black  ink,  and  the  balance  brought  down  on  the  credit  side  on  the  same  page,  or 
transferred  to  a  new  page,  this  entry  being  made  with  black  ink. 


3€? 


^/o 


A 


^J 


Illustration  No.  56.     Reserve  for  Depreciation  of  Office  Equipment  Account 


33 


NOTE— If  property  charged  to  some  fixed  investment  account  is  unexpectedly  destroyed,  stolen  or  dies,  a  journal 
entry  is  made  debiting  Profit  and  Loss  with  the  loss  and  the  Reserve  for  depreciation  account  w.th  the  deprea 
crediting  the  fixed  investment  account  representing  the  value  of  the  property  ^»tji  .the  cost  price  of  the  prop^^^^^^ 
necessary  to  make  this  entry,  because  the  cost  value  of  this  property  is  included  in  the  debit  side  o    the  fixed    n^^^^^^ 
ment  account  to  which   it  ws   charged   when  purchased.        f   property  is  destroyed,  f  "j^-   °;  ^les  it  1^  no   lo^^g^^ 
possession  of  the  business,  and  as  nothing  was  received  for  it,  it  is  a  loss.     H°.^'^^^;;' ^^e  loss  to  the  busmess  w^^^^^ 
be  the  cost  value,  but  the  cost  value  less  the  amount  credited  to  the  depreciation  ^^^0""^       To  illustrate   nf  the  vear' 
1910.  a  typewriter  is  purchased   for  $100.00  and   charged  to  the  Office   Equipment  account^     At  the  end  o    the  year 
December  31st,  IQIO,  a  depreciation  of  10%  is  allowed  for  use  of  office  equipment,    ^^^cember  31    1911   ano^^^^    a  Crnal 
tion  of  10%  is  allowed.     In  January.  1912,  the  typewriter  is  stolen  and  not  /ecoy^^^ed      The  ^of  deeper  makes  a  purna 
entry  debiting  Profit  and  Loss  for  $80.00.  present  value    of   the   typewriter  ($100.00— $10.00— $10.00)     and   i<eserve  tor 
De^edationVofSL  Eq^  for  $20.So.  the  amount  charged  off  as  depreciation,  and  crediting  Office  Equipment  for 

$100.00,  the  cost  of  the  typewriter. 


144 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


STORE  FIXTURES  ACCOUNT. 

§  164.  The  Object  of  this  Account  is  to  show  the  cost  of  property  used  in  the  storeroom,  and 
it  includes  shelving,  partitions,  show  cases,  scales,  etc.  The  nature  of  this  account  is  the  same  as 
the  Office  Equipment  and  the  various  debits  and  credits  are  the  same. 


Debit   Store   Fixtures  Account: 


Credit   Store   Fixtures  Account: 


■[[  I.  With  the  value  of  any  store  fixtures  on 
hand  at  the  beginning  of  the  business. 

^  2.  With  the  cost  of  any  store  fixtures  pur- 
chased during  the  fiscal  period,  whether 
for  new  equipment  or  to  replace  some 
that  has  become  useless. 


T[  3.  With  the  cost  price  of  any  property  sold, 
the  value  of  which  was  charged  to  this 
account.  (If  the  selling  price  is  less 
than  the  cost,  the  difference  is  charged 
to  the  Reserve  for  Depreciation  ac- 
count.) 

^  4.  With  the  cost  of  any  article  replaced, 
destroyed  or  discarded.  (At  the  same 
time  debit  the  Reserve  for  Deprecia- 
tion account.) 


^  5.  The  Balance  of  this  Account  should  at  all  times  show  the  cost  value  of  the  store  fixtures  on 
hand,  and  is  a  resource.  It  appears  on  the  Financial  statement  after  the  active  resources  have  been 
listed. 

^  6.  To  Close  the  Store  Fixtures  Account.  This  account  is  not  closed  except  as  explained  in  §  162, 
^6,  and  when  these  conditions  exist,  it  is  closed  in  the  same  manner. 

RESERVE  FOR  DEPRECIATION  OF  STORE  FIXTURES  ACCOUNT. 

§  165.  It  is  Necessary  to  Set  Aside  a  Reserve  for  decrease  in  value  of  store  fixtures  just 
the  same  as  Office  Equipment.     The  debits  and  credits  affecting  this  account  are  the  same. 


Debit    Reserve   for    Depreciation    Account: 

^  I.  With  the  cost  of  any  article  charged  to 
the  Store  Fixtures  account  and  subse- 
quently replaced. 

^  2.  With  the  difference  between  the  cost  and 
selling  price  of  any  article  sold,  or  ex- 
changed, the  value  of  which  was  charged 
to  the  Store  Fixtures  account  at  the 
time  of  the  purchase. 

^  3.  With  the  cost  of  any  article  debited  to 
the  Store  Fixtures  account  and  sub- 
sequently destroyed  or  discarded. 


Credit    Reserve  for    Depreciation    Account: 

^  4.  At  the  close  of  each  fiscal  period  with, 
the  amount  of  depreciation  as  desig- 
nated by  those  interested  in  the  busi- 
ness. (The  General  Administrative 
Expense  account  is  charged  for  this 
depreciation  because  the  amount  of 
the  expense  has  been  increased  by  us- 
ing the  property.) 
See  note  at  bottom  of  page  143. 


f  5.  The  Balance  of  this  Account  will  show  the  net  amount  reserved  for  depreciation  of  store  fix- 
tures. It  is  deducted  from  the  cost  price  of  the  store  fixtures,  as  shown  by  the  balance  of  that  ac- 
count, this  deduction  being  made  on  the  Financial  statement. 

^  6.  To  Close  the  Reserve  for  Depreciation  of  Store  Fixtures  Account.  This  account  is  not  closed  ex- 
cept as  explained  in  §  163,  \  6,  and  when  these  conditions  exist  it  is  closedin  the  same  manner. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


145 


DELIVERY  EQUIPMENT  ACCOUNT. 

§  166.  The  Object  of  this  Account  is  to  show  the  cost  of  all  property  purchased  for  use  in  deliv- 
ering goods.  It  includes  teams,  wagons,  harness,  automobiles,  or  any  other  conveyances  that  may  be 
used  by  the  business  in  delivering  goods  to  customers.  The  nature  of  the  account  is  exactly  the  same 
as  the  Office  Equipment,  and  it  is  debited  and  credited  in  the  same  manner. 


Debit   Delivery   Equipment   Account: 

T[  I.     With   the  value   of  any  delivery  equip-  ^3. 

ment  on  hand  at  the  beginning  of  the 
business. 

Tl  2.  With  the  cost  value  of  any  delivery 
equipment  purchased  during  the  fiscal 
period,  whether  for  new  equipment  or 
to   replace   some    equipment    that    has  ^  4. 

become  useless. 


Credit  Delivery  Equipment  Account: 

With  the  cost  price  of  any  property 
sold,  the  value  of  which  was  charged 
to  this  account.  (If  the  selling  price 
is  less  than  the  cost,  the  difference  is 
charged  to  the  Reserve  for  Deprecia- 
tion account.) 

With  the  net  cost  of  any  article  replaced, 
destroyed  or  discarded.  (At  the  same 
time  debit  the  Reserve  for  Deprecia- 
tion account.) 


^  5.  The  Balance  of  this  Account  should  at  all  times  show  the  cost  value  of  the  delivery  equipment 
on  hand.    It  appears  on  the  Financial  statement  after  the  active  resources  have  been  listed. 

*If  6.  To  Close  the  Delivery  Equipment  Account.  This  account  is  not  closed  except  as  explained  in 
§  162,  ^  6,  and  when  these  conditions  exist,  it  is  closed  in  the  same  manner. 

RESERVE  FOR  DEPRECIATION  OF  DELIVERY  EQUIPMENT  ACCOUNT. 

§  167.  Property  Purchased  for  Delivery  Purposes  will  decrease  in  value  even  more  rapidly 
than  that  for  office  equipment  or  store  fixtures.  The  various  debits  and  credits  of  the  Reserve  for 
Depreciation  account  are  aetermined  in  the  same  manner  as  the  Office  Equipment  account. 


Debit  Reserve  for  Depreciation  Account: 

^  I.  With  the  cost  of  any  articles  charged  to 
the  Delivery  Equipment  account  and 
subsequently  replaced. 

^  2.  With  the  difference  between  the  cost 
and  selling  price  of  any  article  sold, 
the  value  of  which  was  charged  to  the 
Delivery  Equipment  account  at  the 
time  of  the  purchase. 

%  3.  With  the  cost  of  any  article  debited  to 
the  Delivery  Equipment  account  and 
subsequently    destroyed    or    discarded. 


Credit  Reserve  for  Depreciation  Account: 

^  4.  At  the  close  of  each  fiscal  period  with 
the  amount  of  depreciation  as  desig- 
nated by  those  interested  in  the  busi- 
ness. (The  Selling  Expense  account 
is  charged  for  this  depreciation,  be- 
cause the  amount  of  this  expense  has 
been  increased  by  using  the  property.) 
See  note  at  bottom  of  page  143. 


^  5.  The  Balance  of  this  Account  will  show  the  net  amount  reserved  for  depreciation  of  delivery 
equipment.  It  is  deducted  from  the  cost  price  of  the  delivery  equipment,  as  shown  by  the  balance 
of  that  account,  this  deduction  being  made  on  the  Financial  statement. 

^  6.  To  Close  the  Reserve  for  Depreciation  of  Delivery  Equipment  Account.  This  account  is  not 
closed  except  as  explained  in  §  163,  ^6,  and  when  these  conditions  exist,  it  is  closed  in  the  same 
manner. 


140  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


EXERCISES  IN  FIXED  INVESTMENT  ACCOUNTS. 

The  following  exercises  are  given  to  illustrate  the  various  debits  and  credits  of  the  Office  Equip- 
ment account  (§  162);  Store  Fixtures  (§  164),  and  Delivery  Equipment  (§  166)  accounts;  also  the 
Depreciation  accounts  for  each  as  explained  in  §§  163,  165,  and  167,  and  the  various  paragraphs  un- 
der each.     The  student  will  work  these  out  on  ledger  paper  and  hand  to  the  teacher  for  approval. 

The  exercises  in  fixed  investment  accounts  for  April  are  only  partially  illustrated  by  the  Office 
Equipment  account  and  the  Reserve  for  Depreciation  of  Office  Equipment.  The  method  of  closing 
the  others  is  exactly  the  same.  References  are  given  where  the  student  may  be  in  doubt  as  to  the 
proper  account  to  debit  or  credit.  The  name  of  the  property  purchased  is  written  in  the  explana- 
tion column. 

EXERCISE  No.  49.  April  4th,  bought  one  roller  top  desk,  $35.00;  one  chair,  $5.00;  one  book- 
keeper's desk,  $22.00;  one  stool,  $3.50;  six  chairs,  $12.00;  one  sectional  bookcase,  $23.50  (§  162,  ^  2); 
4th,  bought  one  horse  named  Charlie,  $100.00;  one  horse  named  Bob,  $90.00;  one  horse  named  Joe, 
$75.00;  one  horse  named  Sam,  $85.00;  one  Studebaker  wagon,  $45.00;  one  American  wagon,  $40.00; 
harness,  $15.00  (§  166,  T[2);  coal  scales,  $150.00  (§  164,  ^2);  6th,  bought  one  fire  and  burglar 
proof  safe,  $200.00  (§  162,  ^  2) ;  7th,  paid  $165.50  for  new  partition  in  office  (§  162,  ^  2) ;  i6th,  bought 
one  Fairbanks  scales,  $54.00  (§  164,  T[  2);  31st,  this  being  the  end  of  the  fiscal  period,  the  Reserve  for 
Depreciation  of  each  of  the  three  accounts  is  credited  with  5%  of  the  amount  of  the  debit  side  of  the 
fixed  investment  account.  (§§  163,  165,  and  167,  T[  4  in  each.)  The  accounts  are  footed  but  not 
ruled.    See  illustrations  Nos.  55  and  56. 

EXERCISE  No.  50.  May  ist,  on  hand,  safe,  $150.00;  desk,  $30.00;  chair,  $5.00;  typewriter, 
$90.00  (§  162,  Iji);  showcase,  $40.00;  shelving  in  the  storeroom,  $75.00;  scales  in  the  storeroom, 
$60.00  (§  164,  Tl  i);  one  old  Hickory  wagon,  $50.00;  one  horse  named  Charley,  $100.00;  one  mule 
named  Maud,  $100.00;  harness,  $25.00  (§  166,  ^  i);  the  Reserve  for  Depreciation  of  each  of  these 
accounts  is  credited  with  10%  of  the  cost  value,  being  the  deductions  made  at  the  close  of  the  pre- 
ceding fiscal  period  (§§  163,  165,  and  167,  If  4  in  each). 

EXERCISE  No.  51.  October  ist,  on  hand,  safe,  $140.00;  typewriter,  $60.00;  roller  top  desk, 
$40.00;  bookcase,  $30.00;  files,  $30.00;  scales,  $60.00;  trucks,  $20.00;  four  counters,  $75.00;  shelving, 
$45.00  (§  164,  "If  i);  one  horse  named  George,  $125.00;  one  horse  named  Darby,  $125.00;  one  Peo- 
ples wagon,  $70.00;  harness,  $50.00;  the  Reserve  for  Depreciation  of  each  of  these  accounts  is  cred- 
ited with  10%  of  the  cost  value,  being  the  deductions  made  at  the  close  of  the  preceding  fiscal  period. 

October  loth,  paid  $35.00  for  bookkeeper's  desk  and  $5.00  for  stool;  15th,  bought  a  show  case 
for  $30.00;  i8th,  sold  two  counters  for  $15.00  each  (cost  price,  $18.75  each);  (credit,  §  162,  ^3;  debit, 
§  163,  Tl  2) ;  20th,  exchanged  old  typewriter  for  a  new  one  and  paid  $50.00  difference  (value  of  new 
machine,  $100.00);  (credit,  §  162,  ^  3,  for  $60.00;  debit,  §  162,  ^f  2,  for  $100.00,  and  §  163,  ^2,  for 
$10.00;  also  make  a  journal  entry  showing  the  debits  and  credits  in  this  transaction). 

November  21st,  bought  a  show  case  for  $35.00;  25th,  gave  the  horse  named  George  for  a  horse 
named  Bill,  valued  at  $150.00,  and  gave  our  check  for  $50.00  difference  (credit,  §  166,  ^  3,  for  $125.00; 
debit,  §  166,  ^2,  for  $150.00,  and  §  167,  ^2,  for  $25.00);  also  make  the  required  journal  entry. 

December  9th,  bought  a  new  safe  for  $200.00,  and  was  allowed  $100.00  for  the  old  one.  Gave 
check  for  $100.00,  the  difTerence  (see  reference  given  under  October  20th,  and  make  the  journal  entry); 
i6th,  the  horse  Darby  was  killed  in  a  runaway  (see  note  at  bottom  of  page  143,  and  make  journal 
entry);  paid  $100.00  for  Dolly,  to  take  his  place  (debit,  §166,  ^2);  27th,  bought  a  typewriter  desk 
for  $15.00;  30th,  at  the  end  of  the  fiscal  period  the  Reserve  for  Depreciation  of  each  account  is  credited 
with    5%    of   the   cost   price. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


147 


QUESTIONS. 


i.     What  are  fixed  investments?     (§§21,161.) 

2.  Is     it    necessary     to     keep     special     ac- 

counts   with    each    kind    of    property? 
(§  161.) 

3.  Define  ofifice   equipment   and   name   some 

of  the  property  included  in  this.    (§  162.) 

4.  Name  the  two  special  debits  for  the  Of- 

fice Equipment  account.  (§  162,^^  1,2.) 

5.  Name    the    two    special    credits.      (§  162, 

llf  3  and  4.) 

6.  What    does    the    balance    of    the    Office 

Equipment  account  show?     (§  162.) 

7.  When   and    how   is   the  Office  Equipment 

account  closed?     (§  162.) 

8.  Define    the  Reserve    for    Depreciation  of 

Office  Equipment  account.     (§  163.) 

9.  Why  is  it  necessary  to  keep  this  account? 

(§  163.) 

10.  For  what  is  this  account  debited?     (§  163, 

n  1-3.) 

11.  For  what  is  it  credited?     (§  163,  T[  4.) 

12.  What    does   the   balance   of   this  account 

show?     (§  163.) 

13.  When  and  how  is  it  closed?     (§  163.) 

14.  Define    the    Store  Fixtures    account    and 

name  some  of  the  property  that  is  rep- 
resented by  it.     (§  164.) 


15- 
16. 

17- 
18. 
19. 


20. 
21. 
22. 

23- 
24. 


25- 

26. 
27. 
28. 
29. 


30- 

31- 


For  what  is  it  debited?  (§    164,  ^f^  i,  2.) 
For  what  is  it  credited?    (§  164,  tH  3,  4.) 
What  does  the  balance  show?     (§  164.) 
When  and  how  is  it  closed?     (§  164.) 
Why  is  it  necessary  to  keep  a  Reserve  for 

Depreciation  of  Store  Fixtures  account? 

(§  165.) 
For  what  is  it  debited?    (§  165,  ^^   i — ^3.) 
For  what  is  it  credited?     (§  165,  1[  4.) 
What  does  the  balance  show?     (§  165.) 
When  and  how  is  it  closed?     (§  165.) 
Define  Delivery  Equipment   account,   and 

name  some  of  the  property  represented 

by  it.     (§  166.) 

For  what  is  it  debited?     (§  166,  ^^f  i,  2.) 
For  what  is  it  credited?     (§  166,  ^f  3,  4.) 
What  does  the  balance  show?     (§  166.) 
When  and  how  is  it  closed?     (§  166.) 
Why  is  it  necessary  to  keep  a  Reserve  for 

Depreciation    of    Delivery    Equipment 

account?     (§  167.) 
For  what  is  it  debited?     (§  167,  ^  i — 3.) 
For  what  is  it  credited?    (§  167,  ^  4.) 


SPECIAL  ACCOUNTS  WITH  EXPENSE. 

§  168.  As  Explained  in  §  32,  one  account  may  be  kept  with  Expense,  but  the  best  practice  is  to 
keep  separate  accounts  with  each  particular  class  of  expense.  In  this  set,  the  student  will  keep  two 
accounts  with  expense;  one  with  General  Administrative  Expense,  and  the  other  with  Selling  Expense. 


GENERAL  ADMINISTRATIVE  EXPENSE  ACCOUNT. 


§  169.  The  Object  of  this  Account  is  to  keep  a  record  of  all  amounts  paid  for  services  or  prop- 
erty that  will  be  consumed  by  its  use,  other  than  for  selling  expenses.  Amounts  charged  to  this  ac- 
count include  rent,  salaries  of  partners,  bookkeepers  and  other  office  employees,  depreciation  of  office 
equipment  and  store  fixtures,  stationery,  books,  etc. 


148 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Debit  General  Administrative  Expense  Account:  Credit  General  Administrative  Expense  Account: 


1 

I. 

2. 

3. 

1 

4- 

1[ 

5- 

1 

6. 

If 

7- 

n 

8. 

1[ 

9- 

Hio. 


For  partners'  salaries. 

For  rent. 

For  telephone,  telegrams  and  miscella- 
neous services. 

For  repairs  on  office  equipment  or  store 
fixtures. 

For  depreciation  on  office  equipment  or 
store  fixtures. 

For  salaries  of  all  employees  except 
those  engaged  in  the  selling  department. 

For  license  or  other  taxes  levied  for  the 
privilege  of  doing  business. 

For  insurance  on  property  purchased 
for  sale  and  on  fixed  investments. 

For  cost  of  property  that  will  be  con- 
sumed by  its  use,  such  as  stamps,  sta- 
tionery, etc. 

For  amounts  paid  for  collecting  notes 
and  drafts,  and  paid  to  the  bank  for  issu- 
ing exchange,  collecting  out-of-town 
checks,  etc. 


^11.  For  any  amounts  received  which  reduce 
the  charges  to  this  account. 

f  12.  For  amounts  received  for  the  sale  of 
property,  the  cost  of  which  was  charged 
to  this  account. 


^13.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  cost  of  conducting  the 
business,  except  amounts  paid  for  selling  expense.  The  debit  side  is  always  the  larger.  It  is  one  of 
the  operating  expenses,  and  listed  among  the  losses  on  the  Profit  and  Loss  statement. 

^14.  To  Close  the  General  Administrative  Expense  Account.  After  the  Profit  and  Loss  statement 
has  been  made  and  proved  to  be  correct  by  the  Financial  statement,  this  account  is  closed  into  the 
Profit  and  Loss  account  by  a  journal  entry  (§  200,  ^  2).  When  this  entry  is  posted,  the  account  will 
balance,  and  is  then  ruled  with  single  and  double  red  lines,  and  footed  with  black  ink. 


3o 

7-0  0 

Z0& 
2-3 

/  0 
^  0 

/  3 
33 

Ji€), 

Z-o 

^  'f  -^ 

^  f   ^ 
ua  u 

'^/ 

U^u 

\s/ 

6^ 

3^ 

/^ 

:^o 

(yUzyt^ 

30 

/^ 

K^C 

Illustration  No.  57.     General  Administrative  Expense  Account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


149 


SELLING  EXPENSE  ACCOUNT. 

§  170.  The  Object  of  this  Account  is  to  show  the  cost  of  selling  goods.  This  includes  all 
amounts  paid  to  clerks  whose  services  are  necessary  in  the  selling  department,  and  other  selling  ex- 
penses. 


Debit    the    Selling    Expense   Account: 

^  I.  For  amounts  paid  employees  for  services 
rendered  in  selling  merchandise. 

^  2.  For  amounts  paid  for  delivering  mer- 
chandise, unless  a  special  account  is 
kept  with  Delivery  Expense. 

^  3.  For  all  amounts  pa-id  for  advertising 
and  traveling  expense,  unless  special 
accounts  are  kept  with   these. 

T[  4.  For  all  freight  paid  on  goods  which  are 
to  be  delivered  at  the  customer's  freight 
station,  unless  a  special  account  is  kept. 

%  5.  For  the  depreciation  on  delivery  equip- 
ment, unless  a  special  account  is  kept 
with  Delivery  Expense. 


Credit   the   Selling  Expense  Account: 

\  6.  For  any  amounts  received  that  reduce 
the  cost  of  selling  expense. 

^  7.  For  all  amounts  received  for  services 
rendered  to  others  by  our  delivery 
equipment,  unless  a  special  account  is 
kept  with   Delivery   Expense. 


^  8.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  cost  of  selling  goods.  The 
debit  side  is  always  the  larger.  It  is  one  of  the  operating  expenses,  and  appears  on  the  Profit  and  Loss 
statement,  being  listed  with  the  losses. 

^9.  To  Close  the  Selling  Expense  Account.  After  the  Profit  and  Loss  statement  has  been  made 
and  proved  to  be  correct  by  the  Financial  statement,  this  account  is  closed  into  the  Profit  and  Loss  ac- 
count by  a  journal  entry.  When  this  entry  is  posted,  the  account  will  balance  and  is  ruled  with  single 
and  double  red  lines  and  the  footings  entered  in  black  ink. 


=^^ 

7  ^ 

^^ 

^^^ 

/  S  4^ 

^^ 

^     ^A 

'^^ 

^::^^^o^ 

^  , 

i?^ 

^^ 

^^^ 

^ 

'f^' 

r^ 

Illustration  No.  58.     Selling  Expense  Account. 


150  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

EXERCISES  IN  EXPENSE  ACCOUNTS. 

The  following  exercises  are  given  to  illustrate  the  various  debits  and  credits  of  the  General  Admin- 
istrative Expense  and  Selling  Expense  accounts,  as  outlined  in  §§  169,  and  170,  and  the  various 
paragraphs  under  each.  The  student  will  work  these  exercises  out  on  ledger  paper,  close  the  accounts, 
and  hand  to  the  teacher  for  approval.  References  are  given  where  the  student  may  be  in  doubt  as 
to  the  proper  account  to  debit  or  credit. 

EXERCISE  No.  52.  April  30th,  total  amount  paid  for  General  Administrative  Expense,  per 
the  General  Administrative  Expense  column  in  the  cash  book,  $206.85  (§  169,  ^^f  2,  3,  4,  6,  7) ;  30th, 
total  amount  paid  for  Selling  Expense,  per  the  Selling  Expense  column  in  the  cash  book,  $152.00 
(§  170);  30th,  partners'  salaries,  $200.00  (§  169,  ^  i);  30th,  the  Insurance  account  is  credited  with 
i^  (one  month)  of  $49.50,  the  amount  paid  for  insurance  (§  169,  T[  8);  30th,  this  is  the  close  of  the 
fiscal  period  and  the  proper  accounts  are  charged  with  the  depreciation  on  Office  Equipment,  $23.33; 
Store  Fixtures,  $10.20  (§169,  ^5),  and  Delivery  Equipment,  $22.50  (§  170,  ^[5). 

EXERCISE  No.  53.  January  ist,  paid  telephone  bill,  $20.00  (§  169,  ^3);  5th,  paid  for  stamps, 
$10.00  (§  169,  T[  9);  6th,  payroll  for  the  week,  $40.00  (§  170,  ^  i);  8th,  paid  for  varnishing  ofiice  fur- 
niture, $5.75  (§  169,  1[4);  loth,  paid  for  stationery  and  blank  books,  $35.60  (§  169,  ^9);  12th,  paid 
for  shoeing  horses,  $2.50  (§  170,  ^  2);  13th,  pay  roll  for  the  week,  $40.00 ;  15th,  paid  $18.00  for  license 
(§  169,  ^  7) ;  20th,  paid  $10.00  for  stamps;  20th,  pay  roll  for  the  week,  $40.00;  25th,  paid  for  repaint- 
ing floor  in  office,  $12.00  (§  169,  ^[4);  27th,  pay  roll  for  the  week,  $40.00;  31st,  partners'  salaries. 
$200.00  (§  169,  ^  i);  salaries  for  office  help,  $100.00  (§  169,  ^6). 

February  3d,  payroll  for  the  week,  $40.00;  4th,  sold  a  customer  stamps  for  $3.50  (§  169,  ^  12); 
6th,  paid  collection  charges  on  a  note,  $2.00  (§  169^  ^  10);  9th,  paid  $16.50  freight  on  goods  sold  to 
a  customer  which  we  had  agreed  to  deliver  (§  170,  ^[4) ;  loth,  pay  roll  for  the  week,  $40.00;  nth,  paid 
for  board  of  horses,  $35.00  (§  170,  ^  2) ;  12th,  charges  on  a  telegram,  $1.00  (§  169,  ^  3) ;  15th,  received 
$26.80  for  delivery  service  (§  170,  ^7);  17th,  payroll  for  the  week,  $40.00;  22d,  paid  for  repairs  on 
scales,  $2.50  (§  169,  T[4);  24th,  pay  roll,  $40.00;  28th,  partners'  salaries  $200.00;  pay  roll  for  ofiice 
help,  $100.00;  28th,  this  being  the  close  of  the  fiscal  period,  the  proper  accounts  are  charged  with  the 
depreciation  on  Office  Equipment,  $16.85  (§  169,  ^5);  Store  Fixtures,  $13.50  (§  169,  1[  5) ;  Delivery 
Equipment,  $i8.oo(§  170,  ^  5);  the  Insurance  account  is  credited  with  i  (two  months)  of  the  amount 
($1,211.50);  paid  for  insurance  (§  169,  ^8). 

EXERCISE  No.  54.  July  ist,  paid  rent  in  advance,  $50.00;  2d,  paid  for  telephone,  $4.00;  3d, 
paid  license,  $20.00;  15th,  pay  roll  for  ofiice  help,  $36.50;  clerks' and  drivers'  salaries,  $80.00  (§  170, 
^1f  I  and  2);  22d,  paid  for  papering  office,  $16.50;  31st,  partners'  salaries,  $150.00;  31st,  pay  roll  for 
office  help,  $36.50;  clerks'  and  drivers'  salaries,  $80.00. 

August  1st,  paid  rent  in  advance,  $50.00;  1st,  paid  for  board  of  horses,  $60.00  (§  170,  ^  2) ;  2d,  paid 
advertising  bill,  $18.00  (§  170,  ^3);  3d,  paid  phone  rent,  $4.00;  loth,  paid  blacksmith's  bill,  $10.50 
(§  170,  ^  2);  14th,  paid  for  repairs  on  store  fixtures,  $12.65;  15th,  payroll,  office  help,  $36.50;  clerks' 
and  drivers'  salaries,  $80.00;  23d,  paid  for  stamps,  $20.00;  24th,  bought  stationery,  $11.60  (§  169,  ^  9) ; 
27th,  sold  stamps  for  $4.50  (§  169,  •[[  12);  31st,  partners'  salaries,  $150.00;  31st,  payroll,  office  help, 
$36.50;  clerks'  and  drivers'  salaries,  $80.00. 

September  ist,  paid  rent  in  advance,  $50.00;  2d,  paid  phone  rent,  $4.00;  2d,  paid  for  board  of 
horses,  $60.00;  loth,  paid  for  repairs  on  office  furniture,  $9.60;  14th,  collected  for  delivery  service, 
$36.50  (§  I70»  117);  15th,  paid  for  stamps,  $10.00;  15th,  paid  advertising  bill,  $6.50;  15th,  pay  rolls 
office  help,  $36.50;  clerks'  and  drivers'  salaries,  $80.00;  25th,  paid  $16.85  for  freight  ^^  goods  deliv- 
ered to  a  customer  (§  170,  ^  4);  30th,  pay  roll,  office  help,  $36.50;  clerks'  and  drivers'  salaries,  $80.00, 
30th,  partners'  salaries,  $150.00;  30th,  this  being  the  close  of  the  fiscal  period,  the  Insurance  account 
is  credited  with  X  (three  months)  of  the  amount,  ($90.00)  paid  for  insurance.  The  proper  account; 
are  charged  with  the  depreciation  on  Office  Equipment,  $19.65;  Store  Fixtures,  $12.50,  and  Delivery 
Equipment,  $16.95. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


151 


INSURANCE  ACCOUNT. 

§  171.  As  Stated  in  the  Introduction  where  there  is  a  risk  of  property  being  destroyed  there 
will  be  a  company  organized  to  issue  insurance  to  protect  the  owner  against  loss.  Every  practical 
business  man  will  have  his  property  insured  against  loss  by  fire  or  other  natural  causes.  The  insur- 
ance company  charges  only  a  small  amount  for  the  protection  it  affords.  The  policy  is  the  contract, 
or  agreement,  of  the  insurance  company.  The  premium  is  the  amount  paid  for  the  protection.  The 
cost  of  insurance  will  depend  upon  the  location  of  the  property  and  the  risk  which  the  insurance  com- 
pany assumes.  Insurance  policies  are  usually  issued  for  a  period  of  one  year,  and  the  premium  is  based 
on  this  time.  If  the  policy  is  issued  for  a  less  time,  the  premium  will  be  the  proportionate  part  of 
a  year  with  a  small  additional  charge.     This  is  termed  "Short  Rate." 

The  object  of  the  Insurance  account  is  to  keep  a  record  of  all  amounts  paid  for  insurance.  As 
the  property  insured  may  be  of  a  different  nature  and  represented  by  different  accounts  on  the  books, 
it  is  best  to  charge  all  amounts  paid  for  insurance  to  the  Insurance  account,  and  at  the  close  of  each 
fiscal  period,  credit  this  account  with  the  insurance  that  has  expired,  and  debit  the  proper  service 
account. 


Debit  the  Insurance  Account: 


Credit  the  Insurance  Account: 


^  I.     With    all    amounts    paid    for    insurance 
premiums. 


^  2.     With    insurance    premiums    refunded    on 

canceled  policies. 
^3.     At  the  close  of  each  fiscal  period  for  the 

proportion  of  insurance  expired. 


^  4.  The  Balance  of  this  Account,  after  the  credits  have  been  entered,  will  show  the  amount  of  un- 
expired insurance.  It  is  a  resource  and  appears  on  the  Financial  statement  after  the  active  assets 
and  fixed  investments  have  been  listed. 

^  5.  To  Close-the  Insurance  Account.  This  account  is  not  closed  because  it  will  eventually  balance 
itself.  If  it  is  desired  to  close  the  account  and  bring  the  balance  down  on  the  same  page  or 
transfer  it  to  a  new  page,  the  difference  is  entered  on  the  credit  side  in  red  ink,  as  follows:  The  date, 
the  word  "Balance"  in  the  explanation  column;  and  the  amount  of  the  difference.  The  account  is 
ruled  with  single  and  double  red  lines,  footed  with  black  ink  and  the  balance  brought  down  or  trans- 
ferred to  a  new  page,  on  the  debit  side,  in  black  ink. 


'7 


7  •* 


U/3 


Illustration  No.  59.     Insurance  Account. 


NOTE. — A  record  of  each  policy  should  be  kept  in  a  specially  prepared  book,  which  is  known  as  "Insurance  Policy 
Record."  The  record  in  this  book  must  show  the  policy  number,  the  name  of  the  company,  date  of  the  policy,  date  o/" 
expiration,  amount  of  insurance,  the  total  premium,  the  property  covered  (merchandise,  fixed  investments,  buildings, 
etc.),  and,  if  desired,  the  monthly  premium.  Unless  the  statements  of  the  business  are  made  at  the  end  of  each  month, 
this  column  is  not  necessary. 

The  object  of  this  record  is  to  provide  an  index  of  all  insurance  policies,  that  the  proportionate  part  of  insurance  for 
the  fiscal  period  may  be  readily  ascertained.  This  record  is  also  important  in  case  of  a  fire  or  the  loss  of  an  insurance 
policy.  As  a  general  rule,  the  agent  of  the  insurance  company  will  see  that  no  policies  are  allowed  to  expire  without 
being  renewed,  but  it  is  well  for  the  bookkeeper  to  also  keep  a  record  so  that  the  property  of  the  business  is^ll  always 
be  protected  by  the  proper  amount  of  insurance. 


152 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


QUESTIONS. 


3- 

5. 
6. 


9 
10 
II 
12 


Why  is  it  best  to  keep  special  accounts  14. 

with  expense?     (§  168.)  15. 

Name   the  two  special   accounts  used   in  16. 

this  set.     (§§  169  and  170.)  17. 
Define    General    Administrative    Expense 

account.     (§  169.)  18. 
Name  five  of  the  debits.    (§  169,  T[^  i — 10.) 

Name  the  two  credits.     (§  169,  ^^  11 — 12.)  19. 

What  does  the  difference  of  the  General  20. 

Administrative  Expense  account  show? 

(§  169.)  21. 

On    which    statement    does     it     appear?  22. 

When  and  how  is  it  closed?     (§  169.)  23. 

Define  Selling  Expense  account.     (§  170.)  24. 
Name  the  five  debits.     (§  170,  ^[^  i — 5.) 

Name  the  two  credits.     (§  170,  T[T|  6 — 7.)  25. 
What  does  the  difference   of  the  Selling 

Expense  account  show?     (§  170.)  26. 


13.     On    what    statement    does    it    appear? 


How  and  when  is  it  closed?     (§  170.) 
Define  Insurance  account.     (§  171.) 
What  is  the  contract  called?     (§  171.) 
What  is  the   amount  paid   for  insurance 

called?     (§  171.) 
For  how  long  a  time  are  insurance  poli- 
cies usually  issued?     (§  171.) 
On  what  time  is  the  rate  based?  (§  171.) 
Why  is  an  account  kept  with  insurance? 

(§  171.) 
For  what  is  it  debited?     (§  171,  ^  i.) 
For  what  is  it  credited?     (§  171,  T[*|  2,  3.) 
What  does  the  balance  show?    (§  171.) 
On    which    statement    does    it    appear? 

(§  171.) 
When  and  how  is  the  Insurance  account 

closed?     (§  171.) 
Rule  the  required  form  to  be  used  as  an 

insurance  policy  record.    (§  171,  Note.) 


BLANK  BOOKS. 


§  172.  In  this  Set,  the  student  will  use  the  sales  book,  purchases  book,  journal,  and  cash  book 
as  books  of  original  entry,  and  notes  receivable  and  notes  payable  books  as  auxiliary  books.  The 
ledger  will  be  the  only  book  of  complete  entry  used.  Since  these  books  differ  in  many  respects  from 
those  explained  in  Part  i,  a  brief  description  of  each  is  given,  together  with  an  illustration,  showing 
the  form  and  use  of  each. 

§  173.  Sales  Book.  As  explained  in  §  113,  the  object  of  the  sales  book  is  to  keep  a  record  of 
all  credit  sales.  This  record  must  show  the  name  of  the  person  to  whom  the  sale  was  made,  his  ad- 
dress, the  terms  (if  special),  the  items  sold,  price  and  value  of  each,  and  the  total  amount  of  the  sale. 
The  credit  sales  in  the  average  mercantile  business  are  usually  very  numerous,  hence  it  is  necessary 
to  provide  some  means  of  recording  these  that  will  involve  the  least  possible  amount  of  work.  The 
nature  of  the  business  usually  determines  the  method  to  be  used.  One  of  the  most  popular  methods 
is  to  make  a  carbon  copy  of  each  bill,  retaining  this  carbon  copy  as  the  sales  book  record.  This  method 
saves  the  time  required  in  copying  the  items  and  avoids  the  mistakes  that  are  made  in  doing  this. 

^  I .  The  Sales  Book  used  in  this  Set  is  made  up  of  white  and  yellow  sheets,  arranged  alternately, 
and  with  three  billheads  to  the  page.  The  white  sheet  is  the  billhead,  and  the  copy  made  on  this 
is  sent  to  the  customer.  The  yellow  sheet  is  for  the  carbon  copy,  which  is  the  sales  book  record.  The 
carbon  sheet  is  inserted  between  the  two ;  writing  the  bill  on  the  white  sheet  makes  an  exact  copy  on  the 
yellow  sheet.  The  bill  is  torn  out  along  the  perforated  lines  and  sent  to  the  customer.  The  carbon  copy 
remains  as  the  sales  book  record.  Highly  sensitive  carbon  is  provided  so  that  the  bill  can  be  writ- 
ten with  a  pen  and  a  good  copy  obtained.  The  teacher  may  permit  the  use  of  a  pencil,  but  it  is 
not  advised,  as  the  student  should  have  practice  in  making  carbon  copies  with  a  pen.  If  a  pencil 
is  used,  it  must  have  very  hard  lead  and  be  kept  sharp,  since  good  carbon  copies  can  not  be  obtained 
from  the  use  of  a  soft  pencil,  or  one  with  a  dull  point. 

^  2.  On  the  Inside  of  the  Front  Cover  of  the  sales  book,  special  instructions  are  given  relative 
to  the  use  of  the  carbon  and  method  of  making  calculations. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  153 


Tf  3.  Posting  from  the  Sales  Book.  Each  customer  is  charged  with  the  amount  of  his  purchase. 
The  page  of  his  account  in  the  ledger  is  written  at  the  left  of  his  name  in  the  sales  book,  and  the  page 
in  the  sales  book  is  written  in  the  folio  column  in  the  ledger.  The  street  address  of  each  customer 
must  appear  in  the  ledger.  It  is  not  necessary  to  write  the  items  in  the  ledger,  as  these  can  be  ob- 
tained by  referring  to  the  sales  book.  The  Sales  account  is  not  credited  with  the  amount  of  each 
sale,  but  with  the  total  at  the  end  of  the  month,  or  when  a  trial  balance  is  to  be  taken.  Each  page 
of  the  sales  book  is  footed  and  the  total  forwarded  to  the  next  page.  The  total  sales  for  the  month 
is  represented  by  the  total  shown  on  the  last  page.  If  desired,  each  sale  may  be  listed  on  a  separate 
slip  of  paper,  and  this  pasted  in  front  of  the  last  yellow  sheet  used.  If  this  method  is  used,  it  is 
not  necessary  to  foot  and  forward  the  various  pages  of  the  sales  book.  The  total  of  this  slip  is  the 
total  sales  for  the  month.  If  an  addin'g  machine  is  used,  the  latter  method  is  more  satisfactory,  as 
the  slip  containing  the  amounts  printed  by  the  adding  machine  may  be  used.  Unless  the  items  are 
added  on  the  adding  machine,  the  student  will  have  to  be  very  careful,  as  an  error  in  listing  and 
adding  the  sales  will  mean  a  corresponding  error  in  the  trial  balance. 

§  174.  Purchases  Book.  As  explained  in  §  130,  the  object  of  this  book  is  to  keep  a  record  of 
merchandise  purchased  "on  time."  This  record  must  show  the  name  of  the  person  or  firm  from  whom 
the  purchase  was  made  and  his  address,  the  date  of  purchase,  the  terms,  and  a  description  of  the 
items  purchased  or  reference  to  the  invoice  that  these  items  may  be  obtained.  Since  the  invoice 
contains  all  of  the  information,  it  is  best  to  use  this  as  a  record  in  the  purchases  book.  Where  the 
business  is  very  extensive  and  a  number  of  invoices  are  received,  this  method  may  not  be  practical; 
but  unless  this  is  the  case,  or  a  vertical  filing  system  is  used  for  filing  invoices,  it  is  best  practice  to 
use  the  invoices  as  the  record  in  the  purchases  book.  To  do  this  the  invoice  is  pasted  in  a  specially 
prepared  book,  which  is  known  as  the  "Purchases  Book."  The  best  method  of  doing  this  is  as  follows: 

Put  a  small  amount  of  mucilage  or  paste  on  each  of  the  four  corners  of  the  first  invoice,  and 
place  it  at  the  top  of  the  page  with  the  right-hand  edge  on  the  double  line  ruled  at  the  right.  The 
amount  of  the  invoice  is  entered  in  ithe  money  column  at  the  right,  on  a  line  with  the  name  of  the 
person  or  firm  from  whom  the  merchandise  was  purchased.  To  enter  the  next  invoice,  put  the  muci- 
lage or  paste  on  the  two  lower  corners  only,  allowing  the  top  to  come  just  below  the  terms  on  the 
first  invoice.  This  allows  the  important  facts — firm  name,  date,  terms,  etc.,  to  be  shown.  To  refer 
to  the  items  on  any  invoice,  turn  back  the  top  of  the  invoice  that  covers  them.  All  succeeding 
invoices  on  a  page  are  entered  in  the  same  manner. 

When  a  page  is  full  it  is  footed,  the  amount  is  entered  in  the  money  column  and  the  total  car- 
ried forward  to  the  top  of  the  next  page.  At  the  bottom  of  the  page,  rule  a  single  line  and  place  the 
total  below  it.  At  the  left  on  the  line  with  that  amount,  write  "Carried  Forward."  At  the  top  of  the 
next  page,  write  "Brought  Forward"  and  enter  the  total  of  the  preceding  page  in  the  money  column. 
When  the  first  invoice  is  entered,  the  top  should  come  just  beneath  the  words  "Brought  Forward." 
Unless  each  page  is  footed  and  carried  forward  as  instructed,  the  student  is  apt  to  forget  to  leave  the 
space  at  the  top  of  the  page,  hence  have  no  room  to  write  the  words  "Brought  Forward." 

^  I.  Posting  from  the  Purchases  Book.  Each  person  or  firm  from  whom  merchandise  was  pur- 
chased on  time,  is  credited  in  the  ledger  for  the  amount  of  the  purchase.  This  amount  is  written  in 
the  money  column  in  the  purchases  book,  opposite  the  name  of  the  person  or  firm  from  whom  the  mer- 
chandise was  purchased.  The  entry  in  the  ledger  must  show  the  amount,  page  of  the  purchases 
book,  terms  as  indicated  on  the  invoice,  and  date,  which  is  the  date  the  invoice  is  entered.  The  date 
of  the  invoice  and  terms  should  be  entered  in  the  explanation  column,  to  ascertain  the  due  date  of 
the  invoice.     The  ledger  page  is  written  just  to  the  left  of  the  name  printed  on  the  invoice. 

The  Purchases  account  is  not  charged  with  the  amount  of  each  purchase,  but  with  the  total 
at  the  end  of  the  month.  Each  page  of  the  purchases  book  is  added  and  the  total  forwarded  to  the 
next.  The  total  purchases  for  the  month  is  the  total  of  the  last  page  of  the  purchases  book.  The 
last  page  should  be  ruled  with  single  and  double  red  lines  and  the  total  entered  between  these,  this 
ruling  being  below  the  bottom  of  the  last  invoice.    At  the  left  and  on  the  line  with  the  total  amount. 


154 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  60.     Debit  Side  of  Cash  Book. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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lUustration  No.  61.     Credit  Side  of  Cash  Book. 


156  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

write  "Purchases,  Dr.,  total  purchases  for  the  month."  The  page  of  the  Purchases  account  in  the 
ledger  is  entered  at  the  left  of  the  account  just  written. 

§  175.  Journal.  As  explained  in  §  38,  the  object  of  the  journal  is  to  keep  a  record  of  all  busi- 
ness transactions.  When  credit  sales  are  entered  in  the  sales  book,  credit  purchases  in  the  purchases 
book,  and  cash  received  and  paid  in  the  cash  book,  only  those  transactions  that  are  not  entered  in 
these  books  are  entered  in  the  journal.  The  same  form  is  used  as  in  the  preceding  set.  There  are 
four  steps  necessary  to  record  a  transaction  in  the  journal:  First,  the  date;  second,  the  name  of 
the  account  or  accounts  debited  and  the  amount  or  amounts;  third,  the  name  of  the  account  or  ac- 
counts credited  and  the  amount  or  amounts;  fourth,  the  explanation  or  information  for  the  auditor. 
When  an  entry  requires  more  than  one  debit  or  credit  the  amounts  are  added  to  prove  that  the  debits 
and  credits  are  equal.  Some  bookkeepers  foot  each  page  of  the  journal  to  prove  that  the  total  debits 
equal  the  total  credits.     If  this  is  done,  it  is  not  necessary  to  forward  these  totals. 

§  176.  Special  Columns  in  Books  of  Original  Entry.  The  object  of  special  columns  in  any 
book  of  original  entry  is  to  save  time  in  posting.  If  a  number  of  transactions  affect  the  same  account, 
the  various  amounts  may  be  entered  in  a  special  column.  By  doing  this,  it  is  not  necessary  to  post 
the  various  amounts  until  the  end  of  the  month,  thus  saving  time  in  posting  and  space  in  the  ledger 
account.  Usually  there  are  more  transactions  affecting  cash  than  all  others,  and  many  of  these 
aflFect  the  same  account,  for  which  reason  special  columns  are  more  often  used  in  the  cash  book  than 
any  other  book.     However,  they  can  be  used  in  any  book  of  original  entry. 

1[  I.  When  Posting  from  a  Book  of  Original  Entry  in  which  special  columns  are  used,  amounts  en- 
tered in  the  special  columns  are  not  posted  until  the  end  of  the  month.  To  avoid  this,  it  is  best  to 
place  a  check  mark  (V)  in  the  folio  column  at  the  left  of  the  name  of  the  account.  The  name  of 
the  account  affected  is  written  at  the  top  of  each  special  column  and,  at  the  end  of  the  month,  that 
account  is  debited  or  credited  with  the  total  of  the  column. 

§  177.  Cash  Book.  As  explained  in  §  114,  the  object  of  the  cash  book  is  to  contain  a  record 
of  all  transactions  in  which  cash  is  received  or  paid.  Since  the  Cash  account  is  debited  when  cash 
is  received  and  credited  when  it  is  paid,  the  receipts  and  payments  are  entered  on  separate  pages, 
the  former  being  on  the  left  or  debit  side,  and  the  latter  on  the  right  or  credit  side.  The  form  of  the 
cash  book  used  in  this  set  is  the  same  as  that  in  the  preceding  set,  except  there  are  two  special  col- 
umns on  each  side.  This  means  that  there  are  three  columns  on  each  side,  one  being  the  general 
column  and  the  other  two  the  special  columns. 

§  178.  Debit  Side.  On  this  side  of  the  cash  book  are  recorded  all  transactions  involving  receipts 
of  cash.  To  record  a  transaction  on  this  side,  it  is  necessary  to  write  the  date,  the  name  of  the  per- 
son from  whom  the  money  was  received,  or  the  account  that  produces  the  money,  the  explanation 
and  amount.  All  amounts  are  entered  in  the  first  money  column,  except  those  that  are  entered  in 
the  two  columns  to  the  right  of  this.  All  amounts  received  for  cash  sales  of  merchandise  are  entered 
in  the  second  column.  The  name  of  the  account  (Sales)  is  written  at  the  left  and  a  check  mark  (V) 
placed  in  the  folio  column  to  indicate  that  the  amount  is  not  to  be  posted  until  the  end  of  the  month. 
When  an  invoice  is  paid,  less  discount,  the  deduction  being  made  according  to  the  terms, 
the  creditor  is  charged  with  the  full  amount  of  the  invoice  on  the  credit  side  of  the  cash  book, 
so  that  his  account  will  balance,  and  the  difference  between  the  amount  of  the  check  and  invoice  is 
entered  in  the  third  column  on  the  debit  side  of  the  cash  book.  The  name  of  the  account  (Purchases 
Discount)  is  written  at  the  left,  and  a  check  mark  ( V)  placed  in  the  folio  column  to  indicate  that 
the  amount  is  not  to  be  posted  until  the  end  of  the  month.  This  method  of  making  the  entry  is  the 
same  as  giving  the  firm  we  owe  a  check  in  full  for  the  invoice,  and  their  giving  us  a  check  for  the 
amount  of  the  discount.  The  total  receipts  of  cash  are  represented  by  the  total  of  the  first  two  col- 
umns; but  in  proving  cash,  it  is  necessary  to  use  the  three  columns  because  the  amount  entered  on  the 
credit  side  exceeds  the  check  written  by  the  amount  of  the  discount  on  the  debit  side. 

t  I.  To  Post  from  the  Debit  Side  of  the  Cash  Book.  Each  amount  in  the  first  or  "General"  col- 
umn on  the  debit  side,  is  posted  to  the  credit  of  the  account,  written  on  the  same  line  with  it.    Amounts 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  157 


entered  in  the  second  and  third  columns  are  not  posted  until  the  end  of  the  month;  the  totals  of 
these  columns  are  posted  to  the  credit  side  of  the  account  named  at  the  top  of  the  column. 

§  179.  Credit  Side.  All  transactions  in  which  cash  is  paid,  either  by  check  or  currency,  are 
entered  on  the  credit  side  of  the  cash  book.  To  record  a  transaction  on  the  credit  side  of  the  cash 
book,  it  is  necessary  to  write  the  date,  the  name  of  the  person  to  whom  the  money  i6  paid,  or  the  ac- 
count affected,  the  explanation  and  amount.  All  amounts  are  entered  in  the  first  column,  except 
those  that  are  entered  in  the  two  columns  to  the  right.  All  amounts  paid  for  General  Administra- 
tive Expense  are  entered  in  the  second  column.  The  name  of  the  account  (General  Administrative 
Expense)  is  written  at  the  left,  and  a  check  mark  (V)  placed  in  the  folio  column  to  indicate  that  the 
amount  is  not  to  be  posted  until  the  end  of  the  month.  All  amounts  paid  for  Selling  Expense  are 
entered  in  the  third  column.  The  name  of  the  account  (Selling  Expense)  is  written  at  the  left,  and  a 
check  mark  (V)  placed  in  the  folio  column  to  indicate  that  the  amount  is  not  to  be  posted  until  the 
end  of  the  month.  The  total  payments  of  cash  are  represented  by  the  three  columns,  less  the  amount 
deducted  for  discount,  as  shown  by  the  total  of  the  Purchases  Discount  column,   on    the  debit  side. 

f  1 .  To  Post  from  the  Credit  Side  of  the  Cash  Book.  Each  amount  in  the  first  or  "General"  column 
is  posted  to  the  debit  side  of  the  account  written  on  the  same  line  with  it.  The  amounts  in  the  second 
and  third  columns  are  not  posted  until  the  end  of  the  month ;  the  totals  of  these  columns  are  posted 
to  the  debit  side  of  the  account  named  at  the  top  of  the  column. 

§  180.  To  Prove  Cash.  Foot  the  three  columns  on  the  debit  side  and  place  the  totals  in  small 
pencil  figures  just  beneath  the  blue  line  on  which  the  last  entry  is  made.  The  total  of  each  of  the 
three  columns  is  written  beneath  the  same  blue  Hne.  Foot  the  three  columns  on  the  credit  side  and 
place  the  total  of  each  column  just  beneath  the  blue  line  on  which  the  last  entry  is  made.  The  total 
of  each  column  is  placed  beneath  the  same  blue  line.  On  a  piece  of  scratch  paper  add  the  totals  of 
the  three  columns  on  the  debit  side  and  the  totals  of  the  three  columns  on  the  credit  side.  The  dif- 
ference between  these  two  amounts  is  the  amount  of  cash  on  hand.    This  should  equal  the  amount 

in  the  bank  and  in  the  cash  drawer. 

« 
—  NOTE. — The  form  of  cash  book  described  abov^e  is  not  considered  the  best  by  some  accountants,  but  is  quite  popular 
with  many  bookkeepers.  It  affords  an  accurate  check  on  those  transactions  in  which  discount  is  deducted.  By  placing 
the  discount  deducted  on  the  opposite  side,  errors  made  in  deducting  the  discount  from  the  amount  of  the  bill  or  writ- 
ing the  check  will  be  discovered,  because  the  cash  will  not  prove  unless  the  deductions  are  correct.  An  error  in  adding 
the  discount  column  will  be  discovered,  because  the  cash  will  not  prove  unless  this  column  is  added  correctly.  One  objec- 
tion offered  by  accountants  is  that  the  net  amount  of  cash  received  and  paid  is  not  shown.  To  ascertain  the  amount 
of  cash  received,  add  the  totals  of  the  first  two  columns  on  the  debit  side  and  deduct  from  this  any  discount  entered  on 
the 'credit  side.  To  ascertain  the  amount  of  cash  paid,  add  the  totals  of  the  three  columns  on  the  credit  side  and  deduct 
from  this  the  total  of  the  third  column  on  the  debit  side.  Another  form  of  the  cash  book  in  which  this  objection  is  over- 
come will  be  explained  later  in  this  set. 

§  181.  Check  Book.  As  explained  in  §  104,  banks  provide  blank  checks  to  be  used  by  depos- 
itors for  withdrawing  money  on  deposit.  These  are  usually  arranged  with  two  or  more  checks  to  a 
page,  each  check  provided  with  a  stub  and  a  ruled  column  in  which  to  keep  the  bank  account;  those 
bound  in  a  book  are  known  as  the  "Check  Book."  In  this  set  the  check  book  contains  three  checks 
to  the  page.  Illustration  No.  62  shows  the  first  three  checks,  the  stubs  properly  made  out  and  the 
method  of  keeping  the  account  with  the  bank.  This  is  kept  in  the  column  ruled  at  the  right  of  the 
stub.  The  amount  of  each  deposit,  check,  and  balance  in  the  bank,  is  placed  in  this  column  to  the 
right  of  the  printed  instructions  on  the  stub. 

The  bookkeeper  should  keep  a  copy  of  each  deposit.  The  auditor  will  check  the  cash  receipts 
and  payments  with  the  deposits  and  checks  written.  If  the  bookkeeper  has  a  record  of  the  checks 
and  money  deposited,  the  auditor  can  verify  the  cash  book  entries  with  the  bank  account.  Some 
banks  provide  blank  deposit  tickets  bound  in  book  form  and  arranged  for  an  original  and  duplicate 
of  each  deposit.  The  duplicate  is  made  by  the  use  of  carbon  paper.  When  this  form  is  not  provided 
and  the  loose  deposit  tickets  used,  the  bookkeeper  can  make  his  copy  of  the  deposit  on  the  back  of 
one  of  the  stubs  from  which  the  checks  have  been  removed.  It  is  best  to  use  the  last  one,  which 
would  be  the  one  opposite  the  stub  on  which  the  amount  of  the  deposit  is  entered.  This  copy  of  the 
deposit  should  show  the  currency  deposited,  the  amount  of  each  check  and  name  of  the  city  in  which 


158 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Brought  Forward 
Deposit,  "y^  . 
Ba/ance,  .     . 


Date ^::^^^^2!f:r::..<?^....J-pZ 


Favor. 


Illustration  No.  62.     First  Page  of  Check  Book. 


it  is  payable.  The  checks  should  be  listed  on  the  deposit  ticket  and  copy  in  the  same  order  as 
they  are  entered  in  the  cash  book. 

§  182.  Auxiliary  Books.  A  book  that  gives  information  in  addition  to  that  given  in  the  book 
of  original  entry  is  an  auxiliary  book.  Auxiliary  books  are  kept  for  information  only,  and  no  amounts 
are  posted  from  them.  The  transaction  is  recorded  in  some  book  of  original  entry,  and  in  place  of 
the  usual  explanation  or  information  for  the  auditor,  reference  is  given  to  the  page  of  the  auxiliary 
book  in  which  the  special  information  is  recorded.  The  principal  object  of  auxiliary  books  is  to  give 
more  detailed  information  than  would  be  practical  to  include  in  the  explanation  of  the  transaction 
in  the  book  of  original  entry. 

When  a  note  is  received  from  a  customer,  the  transaction  is  entered  in  the  book  of  original  entry 
and  a  brief  explanation  given,  so  that  the  auditor  may  know  the  transaction  has  been  recorded  cor- 
rectly. It  is  not  practical  to  make  this  explanation  show  all  the  desired  information,  for  which  reason 
a  special  book  is  kept  which  gives  detailed  information  concerning  the  note.  This  book  is  known 
as  the  "Notes  Receivable  Book."  The  notes  receivable  book  is  an  auxiliary  book,  because  it  is  kept 
for  information  only. 

The  above  facts  are  true  in  regard  to  notes  signed  by  the  business,  for  which  reason  the  special 
information  is  given  in  an  auxiliary  book,  known  as  the  "Notes  Payable  Book."    When  an  auxiliary 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  159 

book  is  kept,  the  only  explanation  necessary  in  the  book  of  original  entry  is  a  reference  to  the  page 
of  the  auxiliary  book  which  contains  the  special  information. 

An  auxiliary  book  may  be  kept  to  show  any  special  information  desired,  either  regarding  the 
entries  in  books  of  original  entry  or  ledger  accounts.  The  record  in  the  auxiliary  book  must  be  kept 
so  that  it  can  be  proved  with  the  entry  in  the  book  of  original  entry  or  some  account  in  the  ledger. 
No  facts  shown  by  the  record  in  this  book  should  be  accepted  as  correct  unless  the  results  have  been 
proved. 

§  183.  Notes  Receivable  Book.  This  is  an  auxiliary  book,  and  is  kept  to  show  more  detailed 
information  relative  to  notes  received,  than  is  usually  given  in  the  explanation  or  information  for  the 
auditor  in  the  book  of  original  entry.  When  a  note  is  received  from  a  customer,  the  transaction  is 
entered  in  the  book  of  original  entry  (usually  the  journal),,  and,  instead  of  the  usual  explanation, 
reference  is  given  to  the  page  of  the  notes  receivable  book,  which  shows  detailed  information  rela- 
tive to  the  note.  The  note  is  then  recorded  on  this  page  in  the  notes  receivable  book.  This  book  is 
ruled  so  that  all  the  desired  information  may  be  written  on  one  line.  It  contains  columns  for  the  date 
the  note  was  received,  the  endorser,  the  name  of  the  person  or  firm  who  is  to  pay  it,  the  name  of 
the  person  or  firm  in  whose  favor  it  is  made  payable,  the  name  of  the  bank  or  office  where  it  is  pay- 
able, the  date  of  the  note,  time,  amount,  rate  of  interest,  each  of  the  twelve  months  in  the  year,  and 
any  other  special  information.  Illustration  No.  63  shows  the  notes  receivable  book  with  sufficient 
entries  to  illustrate  its  use. 

^  I.  To  Prove  the  Notes  Receivable  Book.  As  explained  in  §  182,  the  record  given  in  the  auxil- 
iary book  must  be  kept  so  that  it  can  be  proved  with  the  facts  shown  on  the  entry  in  some  book  of 
original  entry  or  the  account  in  the  ledger.  The  debit  side  of  the  Notes  Receivable  account  in  the  led- 
ger shows  the  face  of  each  note  received,  and  the  credit  side,  the  face  of  each  note  when  paid,  hence 
the  difference  is  the  value  of  notes  due  the  business.  If  each  note  is  recorded  in  the  notes  receivable 
book,  the  total  of  the  notes  unpaid  should  be  the  same  as  the  difference  of  the  Notes  Receivable 
account.  The  proof  of  this  book  is  not  complete  unless  the  total  amount  of  notes  on  hand  is  the 
same  as  the  facts  shown  by  this  book  and  the  Notes  Receivable  account  in  the  ledger.  When  a  note 
is  payable  in  some  other  city  and  it  is  sent  to  a  bank  for  collection  this  fact  should  be  stated  in  the 
remarks  column,  that  the  record  in  this  book  may  be  complete.  Unless  he  does  this,  the  bookkeeper 
is  sure  to  have  trouble  in  proving  his  work.  The  correctness  of  the  record  in  the  notes  receivable  book 
should   be   proved   at  least   once   each   month. 

Since  a  draft  drawn  by  us  and  accepted  by  the  person  on  whom  it  is  drawn,  is  "considered  the 
same  as  a  note,  it  is  entered  in  the  notes  receivable  book.  The  draft  should  be  entered  when  drawn. 
If  it  is  payable  a  certain  number  of  days  after  sight,  it  is  necessary  to  wait  until  the  draft  is  accepted 
before  completing  the  record.  A  sight  draft  should  be  entered  in  the  notes  receivable  book,  so  that 
some  permanent  record  may  be  kept  of  it. 

NOTE. — The  bookkeeper  must  keep  a  record  of  all  sight  and  time  drafts  drawn,  and  this  book  provides  the  best 
means  if  no  stub  is  retained.  If  the  drafts  are  bound  in  book  form  and  provided  with  a  stub,  it  is  not  necessary  to  enter 
the  drafts  drawn  in  the  notes  receivable  book  until  after  they  are  accepted.  In  this  case,  sight  drafts  are  not  entered  in 
the  notes  receivable  book. 

§  184.  Notes  Payable  Book.  This  is  an  auxiliary  book,  which  gives  detailed  information 
relative  to  notes  signed  or  drafts  accepted  by  the  business.  The  required  information  is  practically 
the  same  as  that  in  the  notes  receivable  book  and  the  ruling  is  usually  the  same.  The  record  in  this 
book  is  proved  by  comparing  the  total  of  the  unpaid  notes  with  the  difference  of  the  notes  payable 
account  in  the  ledger.  Illustration  No.  64  shows  the  notes  payable  book  with  sufficient  entries  to 
illustrate  its  use. 

NOTE. — Both  the  notes  receivable  and  notes  payable  books  may  be  used  as  books  of  original  entry.  If  so  used,  trans- 
actions relative  to  notes  and  accepted  drafts  are  not  entered  in  the  journal  and  the  posting  is  done  from  these  books 
In  this  set  they  are  used  only  as  auxiliary  books.     The  other  method  will  be  illustrated  later  in  the  work. 


i6o 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


NOTES  RECEIVABLE 


(Draftl 
DRAWER  ( 


(Payer) 


IN  WHOSE  FAVOR 
(Payee) 


WHERE  PAYABLE 


30 


CTi^  Ke-olcurt^-*^ 


/o 

ol/ 


Illustration  No.  63.    Left  Page  of  Notes  Receivable  Book. 


NOTES  PAYABLE 


(Draft)  (Note) 

DRAWER  OR  ENDORSER 


Q  -J^Mf»yJryU.cAy>^. 


(Note)  (Draft) 

MAKER  OR  DRAWEE 

(Payer; 


-J2yzi^r^i^£/a^^^-^ 


IN  WHOSE  FAVOR 
!■  Payee) 


'€Lo. 


<^^ii.cA.£^ynt4-  7Uv(^ /3tt-n4t 


WHERE  PAYABLE 


Illustration  No.  64.     Left  Page  of  Notes  Payable  Book. 


QUESTIONS. 


I. 

2. 
3- 

4- 

5- 

6. 


9- 


10. 


II. 
12. 


13- 


What  blank  books  are  used  in  this  set? 

(§  172.)' 
Describe  the  sales  book.     (§  173,  T|  i.) 
Mention  some  of  the  advantages    in  this 

form.    (§  173.) 
Describe  the  method  of  posting.  (§  173,  ^3.) 
Why   is   the   Sales   account   not   credited 

with  each  sale? 
Describe  the  purchases  book  to  be  used 

in  this  set.     (§  174.) 
Name  some  of  the  advantages. 
Describe   the   method   of  pasting  the   in- 
voices in  the  purchases  book.  (§  174.) 
Describe  the  method  of  posting  from  this 

book.     (§  174,  ^  I.) 
Why  is  the  Purchases  account  not  debited 

with  each  purchase? 
Define  the  journal.     (§  175.) 
If   a   transaction    affects   more   than    two 

accounts,    how    is    the    bookkeeper    to 

know  that  the  debits  and  credits  are 

equal?     (§  175.) 
What  is  the  object  of  special  columns  in 

books  of  original  entry?     (§  i  76.) 


14. 


15- 
16. 

17. 

18. 
19. 

20. 

21. 

22. 

23. 

24. 

25. 
26. 


Describe    the    method    of    posting    from 

books    of    original    entry    with    special 

columns.     (§  176,  ^  i.) 
Describe  the  cash  book  to  be  used  in  this 

set.     (§  177.) 
Name  the  columns  on  the  debit  side  and 

give  the  use  of  each.     (§  178.) 
Name  the  columns  on  the  credit  side  and 

give  the  use  of  each.     (§  179.) 
How. is  cash  proved?     (§  180.) 
Give  some  objection  to  the  form  of  cash 

book  used.     (§  180,  Note.) 
What  form  of  check  book  is  used  in  this 

set?     (§  181.) 
Why    should    the    bookkeeper    retain    a 

copy  of  each  deposit?     (§  181.) 
Define  auxiliary  books.     (§  182.) 
Define  the  notes  receivable  book.   (§  183.) 
Define  the  notes  payable  book.     (§  184.) 
How  is  the  notes  receivable  book  proved? 

(§183,  Hi.) 
How  is  the  notes  payable  book  proved? 

(§  184.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


i6i 


NOTES  RECEIVABLE 

• 

HATE.OF  PAf  ER._ 

TIME 
TO 
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WHEN  DUE 

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Illustration  No.  63.     Right  Page  of  Notes  Receivable  Book. 


NOTES  PAYABLE 

RATFOPPAPFR 

TIME 
TO 
RUN 

U'HFW    niTP 

AMOUNT 

Rate  of 
Int'st 

WHEN  PAID 

YEAR 

MONTH 

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Illustration  No.  64.     Right  Page  of  Notes  Payable  Book. 


§  185.  Retail  Business.  The  merchant  engaged  in  the  retail  business  undertakes  to  supply 
the  demands  of  the  consumer.  He  purchases  the  merchandise  desired  in  the  line  of  business  in  which 
he  is  engaged,  from  the  wholesale  merchant,  jobber  or  manufacturer  in  such  quantities  as  his  busi- 
ness demands  and  keeps  these  in  stock  for  sale.  As  a  general  rule,  he  delivers  the  merchandise  sold 
either  with  his  own  delivery  equipment  or  by  contract.  When  credit  is  extended,  custom  has  fixed 
the  time  of  settlement  as  the  first  of  the  month  following  the  sale.  A  bill  is  sent  with  the  goods  or 
by  mail,  and  on  the  first  of  the  month  a  statement  is  rendered  that  the  customer  may  know  the  amount 
he  owes.  As  a  general  rule,  no  discount  is  allowed  for  prompt  payment.  The  successful  retail  mer- 
chant will  endeavor  to  secure  a  discount  on  all  purchases  and  take  advantage  of  the  discounts  of- 
fered.   Trade  customs  regulate  the  amount  of  the  discount  allowed  for  prompt  payment  of  invoices. 

§  186.  Information  relative  to  Coal,  Hay,  Grain  and  Feed.  Coal  is  purchased  from  the 
mines  by  the  wholesale  or  retail  dealer.  This  is  billed  per  long  ton  of  2240  pounds,  or  short  ton  of 
2000  pounds.  The  retail  dealer  usually  makes  his  price  per  short  ton,  and  sometimes,  when  sold  in 
small  quantities,  per  bushel.  A  bushel  of  coal  weighs  eighty  pounds,  hence  a  short  ton  consists  of 
twenty-five  bushels.  Coal  is  shipped  in  open  cars,  a  car  containing  from  forty  to  fifty  tons.  The 
price  is  regulated  by  the  grade,  or  size  of  the  lumps.  The  large  coal  is  designated  as  "Lump;"  the 
next  grade,  "Family,"  which  is  practically  the  same  except  the  lumps  are  not  so  large;  the  next  grade, 
"Egg,"  which  is  smaller  than  lump,  and  used  principally  for  open  grates  and  heating  stoves;  the  next 
grade,  "Nut,"  which  is  used  principally  for  cooking;  the  next  grade  is  "Slack,"  or  "Steam,"  which 
is  practically  all  dust,  accumulated  from  handling  other  coal,  and  is  used  for  steam  purposes.  Some 
dealers  do  not  carry  as  many  grades  as  described  above,  and  these  grades  are  not  always  named  as 
given  here;  however,  this  will  illustrate  to  the  student  the  method  of  grading  coal.  The  lump  coal 
always  sells  at  the  highest  price,  and  the  slack  or  steam  coal  at  the  lowest  price.  The  coal  is  graded 
at  the  mines,  but  the  dealer  must  re-grade  it  after  it  is  delivered  to  him.  While  he  pays  for  a  car  of 
lump  coal  at  the  mine,  it  will  not  all  be  lump  when  sold,  because  much  of  it  will  break  in  handling. 
NOTE. — All  coal  purchased  in  this  set  is  bought  and  sold  per  short  ton  of  2000  pounds. 


i62  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Hay  is  put  up  in  bales,  which  weigh  75  to  100  pounds.  It  is  not  practical  to  make  all  the  bales 
the  same  weight,  because  the  press  and  weight  of  the  hay  can  not  always  be  the  same.  It  is  usually 
sold  per  ton  of  2000  pounds,  or  per  100  pounds. 

Shelled  corn,  oats  and  other  grain  are  usually  sold  by  the  bushel,  but  put  up  in  sacks  or  bags.  It 
is  not  practical  to  get  an  even  number  of  bushels  in  a  sack,  hence  it  is  necessary  to  weigh  each  one 
to  determine  the  number  of  bushels  it  contains.  A  state  law  designates  the  weight  of  a  bushel  of 
grain.     With  few  exceptions,  a  bushel  of  shelled  corn  weighs  56  pounds,  and  oats  32  pounds. 

Feed  consists  of  bran,  shorts  and  other  by-products  of  wheat  and  corn  that  are  used  for 
feeding  horses  and  cattle.  It  is  usually  put  up  in  sacks  and  sold  by  the  sack  or  100  pounds.  When 
the  price  is  per  100  pounds,  it  is  necessary  to  weigh  the  sack  in  order  to  determine  its  value.  When 
sold  per  sack,  the  weight  does  not  have  to  be  considered  in  estimating  the  value. 

The  method  of  making  calculations  in  sales  of  the  above  is  fully  explained  on  the  inside  of  the 
front  cover  of  the  sales  book. 

§  187.  Terms  on  Bills.  It  is  customary  for  wholesale  merchants,  jobbers  and  manufacturers 
to  allow  their  customers  a  special  discount  for  prompt  payment  of  merchandise  purchased.  The 
amount  of  discount,  time  in  which  the  invoice  may  be  paid,  and  discount  deducted,  are  governed  by 
trade  customs  in  the  line  of  business  represented.  The  special  discount  and  time  are  given  in  the 
terms  on  the  invoice.  If  the  terms  are  "2/10 — n/30,"  the  purchaser  understands  that  he  may  de- 
duct 2%  from  the  face  of  the  invoice  if  payment  is  made  within  ten  days  from  the  date  of  the  invoice. 
If  he  does  not  make  payment  until  the  end  of  thirty  days,  he  must  pay  the  full  amount,  and  this 
is  due  at  that  time.  The  terms,  "3/30 — n/60,"  indicate  that  a  discount  of  3%  may  be  deducted 
if  payment  is  made  within  thirty  days  from  the  date  of  invoice,  and  that  the  full  amount  is  due  at 
the  end  of  sixty  days.  The  discount  is  calculated  on  the  value  of  the  merchandise  and  must  not  be 
calculated  on  amounts  charged  for  prepaid  freight.  If  any  of  the  merchandise  described  in  the  in- 
voice has  been  returned  for  credit,  this  must  be  deducted  before  calculating  the  discount.  Aside  from 
the  fact  that  the  invoice  must  be  paid  within  the  time  mentioned  in  order  to  secure  the  discount, 
the  time  is  not  considered  in  making  the  calculations.  The  inattentive  student  is  apt  to  confuse 
this  with  discount  (prepaid  interest)  deducted  from  notes. 

§  188.  Part  Payment  of  Invoices  or  Bills  Subject  to  a  Discount.  It  is  not  necessary  to 
pay  the  full  amount  of  an  invoice  or  bill  within  the  discount  period  in  order  to  secure  a  discount  on 
the  payment.  If  a  part  payment  is  made,  it  is  necessary  to  divide  the  amount  of  the  payment  by  one 
hundred  less  the  rate  of  discount  in  order  to  ascertain  the  value  of  the  payment.  If  the  face  of  the 
invoice  is  $200.00  and  the  rate  of  discount  3%,  it  would  require  $194.00  for  full  payment  within  the 
discount  period.  The  amount  of  cash  ($194.00)  is  not  used  in  calculating  the  discount,  this  being 
calculated  on  the  amount  of  the  indebtedness  ($200.00).  For  the  same  reason,  when  only  a  part 
payment  is  made,  the  amount  of  the  cash  is  not  multipHed  by  the  rate  in  order  to  ascertain  the  amount 
of  the  discount.  As  the  value  of  the  payment  is  not  known,  it  is  necessary  to  divide  in  order  to  as- 
certain this.  The  student  who  understands  the  principles  of  percentage  will  have  no  trouble  in  under- 
standing the  reason  for  this.  When  the  rate  and  percentage  are  given,  it  is  necessary  to  divide  the 
percentage  by  the  base  (100)  minus  the  rate  of  discount.  The  result  of  dividing  the  amount  re- 
ceived by  one  hundred,  less  the  rate  of  discount,  is  the  value  of  the  payment;  that  is,  the  amount 
to  be  debited  or  credited.  The  difference  between  this  and  the  amount  received  or  paid  is  the  dis- 
count. 

Example:  $190.00  is  received  as  part  payment  of  a  sale  which  was  subject  to  a  5%  discount — 
$190.00  -^  95  (100 — 5)  =  $200.00.  The  customer  is  credited  with  $200.00  and  Sales  Discount  charged 
with  $10.00.  We  send  a  check  for  $500.00  as  part  payment  of  an  invoice  subject  to  a  3%  discount — 
$500.00  -^  97  (100 — 3)  =  $515.46.  We  charge  the  creditor  with  $515.46  and  credit  Purchases  Dis- 
count with  $15.46. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  163 


EXERCISES  IN  RECEIPTS  AND  PAYMENTS,  LESS  DISCOUNT,  IN  FULL  AND  IN  PART. 

Make  the  required  entries  in  the  cash  book  for  the  following  exercises.  Use  a  double  sheet  of 
journal  paper  and  write  the  debit  entries  (§178)  on  the  left,  and  the  credit  entries  (§179)  on  the 
right.     Part  payments  subject  to  discount  are  explained  in  §  188. 

EXERCISE  No.  55.  i.  January  9th,  bought  of  L.  H.  Mabley,  3/10 — n/30,  $162.95.  Paid  this 
amount  in  full  by  check,  January  i8th.  (The  student  will  make  the  entry  for  the  payment,  but  not 
for  the  purchase.) 

2.  February  5th,  sold  M.  D.  Puterbaugh,  4/10 — n/30,  $429.86.  Received  a  check  in  payment 
of  this  on  the  14th. 

3.  May  27th,  bought  from  Union  Mfg.  Co.,  3/10 — n/60,  $529.48.     Paid,  June  5th. 

4.  March  4th,  bought  of  Anderson  &  Mumford,  5/10,  3/30 — n/60,  $1,642.87.  Made  payments 
as  follows:  March  12th,  $950.00;  March  25th,  $291.00;  March  31st,  $97.00;  April  2d,  $97.00;  May 
1st,  the  balance. 

5.  July  i6th,  sold  F.  W.  Ellis,  3/10,  2/30 — n/60,  $1,262.48;  July  25th,  received  a  check  for 
$485.00;  August  9th,  $196.00;  August  14th,  $392.00;  September  ist,  $100.00;  September  15th,  the 
balance. 

6.  August  loth,  bought  of  Davis  Bros.,  6/10,  5/30,  3/60 — n/90,  $2,992.50.  Made  payments 
as  follows:  August  19th,  $1,500.00;  31st,  $500.00;  September  30th,  $400.00;  October  9th,  $100.00; 
December  ist,  the  balance. 

7-  July  3d,  sold  C.  E.  Huff,  5/10,  3/30,  2/60 — n/90,  $2,556.98.  Received  payments  as  fol- 
lows: July  I2th,  $1,200.00;  31st,  $500.00;  August  26th,  $400.00;  September  2d,  $100.00;  October  ist, 
$100.00:  November  ist,  the  balance. 

8.  November  i6th,  bought  from  Cecil  Bros.,  3/10 — n/30,  $526.49.     Paid,  November  24th. 

9.  April  loth,  sold  J.  T.  Wissell,  4/10 — n/60,  $397.62.     Received  check  in  full,  April  20th. 

10.  September  14th,  bought  from  R.  N.  Gardner,  2/30 — n/60,  $629.07.       Paid,  October  12th. 

11.  October  nth,  sold  J.  H.  Schulmann,  4/10,  3/30,  1/60 — n/90,  $729.62.  Received  payment 
as  follows:  October  i8th,  $300.00;  November  8th,  $250.00;  December  6th,  $100.00;  January  ist, 
the  balance. 

12.  May  24th,  bought  of  George  Wolf  &  Sons,  7/10,  5/30,  3/60,  2/90 — n/120,  $4,782.63.  Paid 
as  follows:  June  3d,  $2,000.00;  June  23d,  $200.00;  July  20th,  $250.00;  August  20th,  $100.00;  Sep- 
tember 1st,  $100.00;  October  ist,  the  balance. 

§  189.  A  Business  Letter  is  a  communication  written  with  a  pen  or  typewriter  relative  to 
some  business  transaction.  The  ability  to  write  a  good  business  letter  should  be  the  pride  of  every 
business  man.  A  letter  should  be  in  correct  form,  brief  but  explicit,  and  contain  all  the  required 
information.  The  important  features  of  a  business  letter  are  as  follows:  the  date,  the  name  of  the 
person  to  whom  it  is  addressed,  the  city  in  which  he  is  located,  salutation,  the  body  of  the  letter,  the 
form  of  closing  and  the  signature. 

^  I.  The  Date  should  be  the  day  on  which  the  letter  is  written,  and  is  given  that  the  person  >. 
whom  the  letter  is  addressed  will  know  the  day  it  was  written  and  can  use  this  for  reference. 

*[[  2.  The  Name  of  the  Person  to  whom  the  letter  is  written  is  begun  at  the  left-hand  side  of  the 
page,  about  three-fourths  of  an  inch  from  the  edge  of  the  paper.  If  he  is  a  professional  man  his  title 
should  precede  his  name  or  follow  it.  The  former  custom  of  writing  "Mr."  or  "Messrs."  has  been 
discarded,  because  it  is  not  necessary. 

^  3.  The  Address  refers  to  the  city  in  which  the  person  to  whom  the  letter  is  sent  resides,  and 
the  state  in  which  this  is  located.  It  is  written  on  the  line  below  the  name  and  may  begin  at  the 
same  point  or  about  three-fourths  of  an  inch  to  the  right. 

^  4.  The  Salutation.  A  business  letter  usually  consists  of  the  words  "Gentlemen,"  "Dear  Sir," 
"My  dear  Mr.  Jones,"  etc.  This  is  written  on  the  line  below  the  address  and  may  begin  at  the  same 
point  as  the  name,  or  about  three-fourths  of  an  inch  to  the  right  of  the  address. 


1 64 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


C.  W    Keeland  8c  Co 

DEALERS     IN 

HAV,     GRAIN,    FEIEID   AND    COAL. 


— -—-<— 'z:?-^^>t:''?<?-z-t^-f>c<^,    ^--v       ^-^"^--^^^-^^    7 ^    /<^/ 


-^^^J^/^^ 


Illustration   No.  65.     A  Business  Letter. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  165 


T[  5.  Body  of  the  Letter.  This  should  state  the  facts  under  discussion  in  as  brief  a  manner  as  pos- 
sible. If  more  than  one  subject  is  discussed  each  should  be  given  a  separate  paragraph.  Red  ink 
may  be  used  for  important  information,  if  written  with  a  typewriter;  if  written  with  a  pen  it  may 
be  underscored  The  body  of  the  letter  should  begin  about  one  and  one-half  inches  from  the  left-hand 
edge  of  the  paper  and  on  the  next  line  below  the  salutation.  Each  new  line,  except  those  beginning 
new  paragraphs,  should  begin  at  the  same  point  as  the  address,  thus  preserving  an  even  margin  of 
about  three-fourths  of  an  inch  on  the  left-hand  side  of  the  letter.  Each  new  paragraph  is  begun  on 
a  line  with  the  body  of  the  letter. 

^  6.  The  Closing.  This  consists  of  the  words  "Very  respectfully,"  "Respectfully. yours,"  "Yours 
truly,"  etc.,  and  the  signature  of  the  person  or  firm  who  is  writing  the  letter.  The  closing  words 
should  begin  on  the  next  line  below  the  body  of  the  letter  and  in  the  center  of  the  page;  the  name 
should  be  on  the  next  line  below  and  about  three-fourths  of  an  inch  to  the  right.  If  signed  by  a  firm, 
the  name  of  the  individual  who  wrote  the  letter  should  appear  beneath  that  of  the  firm. 

If  it  is  necessary  to  use  more  than  one  sheet  of  paper  in  writing  a  business  letter,  the  second  page 
should  begin  on  a  new  sheet  and  not  on  the  back  of  the  first.  A  carbon  copy  should  be  kept  of  each 
letter  written  and  filed  with  the  original  letter  for  future  reference.  It  shows  ignorance  and  a  lack 
of  business  courtesy  to  answer  a  business  letter  on  the  original  letter,  either  on  the  back  or  front. 

Illustration  No.  65  shows  one  form  of  a  letter  and  the  student  may  use  this  as  a  guide. 

§  190.  Arrangement  of  Accounts  in  the  Ledger.  If  the  volume  of  business  is  large  enough 
to  justify  it,  it  is  better  to  keep  three  separate  ledgers,  one  with  the  general  accounts,  one  for  accounts 
with  creditors,  and  one  for  accounts  with  customers.  If  only  one  ledger  is  used,  this  should  be 
divided  into  three  parts,  and  the  three  classes  of  accounts  mentioned  above  kept  in  separate  parts  of 
the  ledger.  When  this  is  done,  it  is  best  to  reserve  the  first  part  of  the  ledger  for  the  general  accounts, 
the  second  part  for  accounts  with  creditors  and  the  third  part  for  accounts  with  customers.  The 
space  allotted  to  each  account  must  be  determined  by  the  number  of  amounts  to  be  entered  in  it. 
The  division  of  the  ledger  into  sections  applies  whether  a  loose  leaf  or  bound  ledger  is  used.  By 
dividing  the  ledger  into  sections,  it  requires  less  time  for  posting,  checking  statements  received  from 
creditors  and  rendering  statements  to  customers. 

NOTE. — Some  bookkeepers  do  not  write  the  name  of  the  book  of  original  entry  in  the  ledger,  especially  when  the 
ledger  is  divided  into  sections  as  suggested.  Practically  all  the  amounts  entered  on  the  credit  side  of  a  creditor's  account 
are  posted  from  the  purchases  book,  and  those  entered  on  the  debit  side,  from  the  credit  side  of  the  cash  book.  Prac- 
tically all  the  amounts  entered  on  the  debit  side  of  a  customer's  account  are  posted  from  the  sales  book,  and  those  on 
the  credit  side,  from  the  debit  side  of  the  cash  book.  The  few  debits  or  credits  that  may  be  posted  from  the  journal 
can  be  indicated  by  writing,  "Note,  sixty  days,"  or  such  other  explanation  as  may  be  desired  in  the  explanation  column. 
This  would  indicate  that  the  transaction  was  posted  from  the  journal  and  that  the  page  in  the  folio  column  referred  to 
this  book. 

The  student  is  instructed  to  write  the  name  of  the  book  of  original  entry  in  the  page  column  or  in  the  explanation 
column  just  to  the  left  of  the  page  number,  and  he  should  follow  these  instructions.  The  above  explanation  is  given  so 
that  he  will  understand  why  these  pages  are  omitted,  in  case  he  should  take  charge  of  a  set  of  books  in  which  the  name 
of  the  book  of  original  entry  had  not  been  entered.  It  requires  very  little  time  to  indicate  the  book  by  a  letter  as  "P" 
for  purchases  book;  "S"  for  sales  book;  "C"  for  cash  book,  and  "J"  for  journal;  and  by  using  these,  the  student  is  always 
sure  of  having  a  ready  reference  to  the  transaction  in  the  book  of  original  entry. 

§  191.  Index.  The  object  of  the  index  is  to  facilitate  finding  an  account  in  the  ledger.  The 
space  for  the  index  may  be  the  first  few  pages  of  the  ledger,  or  in  a  special  book  depending  entirely 
upon  the  number  of  pages  and  accounts  in  the  ledger.  It  is  best  to  have  the  space  in  the  first  part 
of  the  ledger,  because  a  separate  book  is  always  sure  to  be  somewhere  else  when  needed.  The  pages 
for  the  index  are  special  ruled  and  arranged  to  contain  the  name  of  the  accounts  in  alphabetical  order. 
All  personal  accounts  should  be  written  with  the  surname  first  and  the  initials  following.  The  page 
should  be  written  at  the  extreme  right  of  the  space  reserved  for  the  index  and  on  the  same  line  with 
the  account.     If  the  account  is  forwarded,  a  line  can  be  drawn  through  the  page  on  which  it  was 


1 66 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


rn,  .r,   /  MONTHLY  STATEMENT  OF  ACCOUNT 


1^^^  /.        IQI 


IN  ACCOUNT  WITH 


C.  W.  Keeland  &  Co. 


HAY,    GRAIN,    FEIEID  AND    COAL 


INTEREST 

CHARGED  ON  ALL   BILLS                      ALL   BILLS 
PAST  DUE 

"OLLOWIN 

G    SALt 

ME    MONTH 

IMnntf 

^^^^ 

A/./i^    per  B.lt  Rmler-,! 

/^ 

^^ 

Showing  onr  debit. 


Foi  in  ,g-  MONTHLY  STATEMENT  OF  ACCOUNT 


^^,^  X         IQI 


M^ 


IN  ACCOUNT  WITH 


,    -^^-  yy^  /^^^  y^^-.-^y^. 


C.  W.  Keeland  &  Co 


HAV,    GRAIN,    FEED  AND    COAL 


INTEREST 

CHARGED  ON   ALL   BILLS 
PAST  DUE 

ALL    BILLS 

OLLOWIN 

3    SALE 

<E    MONTH 

Hnliirn, 

^::::^2^^^^ 

^-^ 

Milne     ;»T    S///   Renlerril 

JZ^ 

.<y^ 

4^^  /£' 

yyy.^ 

/  ''^ 

Showing  two  debits. 


I  ir,     of  MONTHLY  STATEMENT  OF  ACCOUNT 


lo'.^. 


MONTHLY  STATEMENT  OF  ACCOUNT 


IVU^ 


-y^^C^^  X    IQI 


^^,^-;;g>^>^-?'T;>^ 


^"^^^^^^ 


IN  ACCOUNT  WITH  Xj'yp^^^^gg^^es-g^t^^^^-zg^-^^^g^^^ig^ 

C.  W.  Keeland  &  Co 
HAY,    GRAIN,    FEBD  AND    COAL 


\AyJ^:Z^ye^^i>i-<f<i-i!^(^y^'^y^-e:^^ 


IN  ACCOUNT  WITH 


-^/^,/^^.-^fe^^>^;^' 


C.  W.  Keeland  &  Co. 
HAY,    GRAIN,    FEIEID  AND    COAL 


INTEREST 

CHARGED  ON  ALL   BILLS                      ALL   BILLS 

DUE   FIRST  OF  T 
FOLLOWING    SALE 

HE   MONTH 

Wntanr. 

.^-^^-^ 

^ 

.»/./.!»•    /.pr  BM  Rmlrrr.! 

^^ 

/ 

1^^ 

^ 

.     ^^ 

y^ 

; 

^ 

LL  BILLS   DUE   FIRST 


FOLLOWING    SALE 


/<^^^^^ 


^ 


^^^ 


^/ 


,££l 


.Wi^w    /Iff  BM  Henlereil 


:^ 


J^2 


x-r^ 


jL^ 


y-  7^ 


-^^ 


.^f^ 


^^ 


yj^  ^j-    j^.^J', 


Showing  one  debit  and  one   credit. 


Showing  two  debits  and  three  credit.^. 


rni  in   .^  MONTHLY  STATEMENT  OF  ACCOUNT 

^^^^^^   /     191. 


MONTHLY  STATEMENT  OF  ACCOUNT 


IVte^,^^^ 


yCf^^^-,^/  IQI 


IN  ACCOUNT  WITH 


^=^-ff  t^~/^=:^-^^'-^r2^,^!r^. 


C    W.  keeland  8t  Co 


/ 


IN  ACCOUNT  WITH 


C.  W.  keeland  &  Co 


HAY,    GRAIN,    FEIEID  AND    COAL 


HAY,    GRAIN,    FEIEID  AND    COAL 


INTEREST 

CHARGED  ON   ALL    BILLS                      ALL    BILLS 
PAST  DUE 

DUE    FIRS 
-OLLOWIN 

T    OF    T 
G    SALE 

HE   MONTH 

Biilnnrr 

(ii^^^"^-^!^' 

^ 

lf./s>    per    Hill    Rtrulrren 

>J^^ 

^/ 

/^ 

jrv 

f/ 

■^7 

^Z 

^~7^^x-^ 

/ 

2^ 

^^ 

7^ 

7a 

~J~'7 

FOLLOWING 


^^ 


'7^^.^       7         «"'" 


^ 


A/'^s/     /*er   fiW/   RerulfTrft 


::^^^^ 


-^-^  >^>»' 


.^::^ 


<^g^ 


^^ 


ziz 


£^ 


ii£/ 


-^■^ 


-£i' 


^,^~ 


Showing  two  debits  and  one  credit. 


Showing  a  balance  from  preceding  month 


Illustration  No.  66.     Statements  of  Accounts. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


167 


located,  and  the  new  page  written  just  to  the  left  of  it.    By  this  means  the  page  on  which  the  account 
is  to  be  found  is  the  one  nearest  the  account. 

The  student  is  apt  to  overlook  the  importance  of  indexing  accounts,  because  there  are  so  few 
in  his  ledger  that  he  can  find  them  very  readily  without  the  index.  He  should  form  a  habit  of  index- 
ing all  accounts  in  his  school  work,  as  this  would  insure  much  better  attention  to  this  class  of  work 
when  he  goes  into  an  office  where  it  is  absolutely  necessary  for  the  accounts  to  be  indexed.  If  the 
ledger  contains  several  hundred  pages,  it  will  require  some  time  to  locate  an  account  that  has  not 
been  properly  indexed. 

NOTE. — In  loose  leaf  ledgers  there  is  no  index;  the  sheets  which  contain  the  accounts  are  arranged  in  the  ledger  in 
alphabetical  order,  and  are  separated  by  division  sheets,  having  tabs  on  the  edge  to  facilitate  locating  the  accounts. 

§  192.  Statement  of  Account.  Each  customer  is  charged  (debited)  with  the  amount  of  each 
purchase,  and  a  bill  rendered  that  he  may  know  he  has  received  the  goods  charged  to  him,  that  the 
price  is  correct,  and  that  there  are  no  errors  in  the  extensions.  In  a  retail  business  where  the  accounts 
are  due  on  the  first  of  the  month  following  the  sale,  statements  should  be  rendered  at  that  time,  show- 
ing the  present  condition  of  the  customer's  account.  The  statement  should  show  the  date  and  amount 
of  each  charge  and  the  date  and  amount  of  each  credit,  also  the  balance  or  difference  between  the 
charges  and  credits.  It  is  not  necessary  for  the  statement  to  show  the  items  charged,  as  the  pur- 
chaser has  these  on  the  bill  rendered  at  the  time  the  sale  was  made.  The  statement  sent  on  the  first 
of  the  month  is  to  show  the  charges  and  credits  during  the  preceding  month.  If  there  is  a  balance 
from  the  preceding  month,  this  is  indicated  on  the  first  line  ("Balance")  of  the  statement.  Illustra- 
tion No.  66  shows  the  correct  form  of  some  statements  the  student  will  have  to  render  on  the  first 
of  May.  All  of  these,  with  the  exception  of  the  one  in  the  lower  right-hand  corner,  are  the  same 
as  those  he  will  have  to  render,  both  in  regard  to  form  and  amount.  The  exception  shows  the  form 
to  be  used  June  ist.  This  being  a  new  business,  there  will  be  no  balances  on  the  statements  rendered 
May  1st. 


QUESTIONS. 


1.  Define  the  business  of  a  retail  merchant. 

(§  185.) 

2.  How  is  coal  graded?     (§  186.) 

3.  Name  the  grades  used  in  this  set  (§  186.) 

4.  What  is  a  long  ton?    A  short  ton?  (§  186.) 

5.  How  is  hay  prepared  for  the  market? 

6.  How  is  it  priced?     (§  186.) 

7.  How  is  corn,  oats  and  other  grain  usually 

put  on  the  market?     (§  186.) 

8.  How  many  pounds  of  oats  to  the  bushel? 

Of  corn?     (§  186.) 

9.  What  is  meant  by  terms  on  bills?  (§  187.) 

10.  What  do   the   terms   "4/10,  3/30 — n/6o" 

indicate? 

11.  When    a   customer   pays   a   bill,    less   dis- 

count, how  does  he  make  his  calcula- 
tions?     (§  187.) 

12.  Is  it  necessary  to   pay  all  of  the  bill   in 

order   to   get    the    benefit    of    the   dis- 
count?    (§  188.) 

13.  When  only  a  part  of  the  bill  is  paid,  how 

is  the  amount  to  be  credited  and  the 
discount  ascertained?     (§  188.) 


14. 
15- 


16. 


17- 


What  is  a  business  letter? 

Write  a   letter  applying  for  the   position 

of    assistant   bookkeeper  in    answer   to 

an     advertisement     in      one     of    your 

local  papers. 
Why   is   it   best   to   have   three   separate 

ledgers?     (§  190.) 
If  three  separate  ledgers  are  kept,   what 

does  each  contain?     (§  190.) 

18.  If  the  volume  of  business  does  not  justify 

keeping  three  ledgers,  how  is  the  one 
ledger  arranged?     (§  190.) 

19.  Why  are  accounts  indexed?     (§  191.) 

20.  What  is  a  statement  of  account?  (§  192.) 
When  are  statements  rendered?  (§  192.) 
What  must  a  statement  show?     (§  192.) 

If  a  customer  owed  a  balance  prior  to  the 
month  for  which  the  statement  is  ren- 
dered,   where    is    it    written?     (§  192.) 

Why  is  it  not  necessary  to  show  all  the 
items  on  the  statement? 


21. 
22. 

23- 
24. 


1 68 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  193.  Sundry  Resource  Inventories.  At  the  close  of  the  fiscal  period  there  is  usually  prop- 
erty on  hand  and  debts  due  the  business  that  are  not  shown  on  the  books.  This  is  property,  the  value 
of  which  has  been  charged  to  some  service  account  or  debts  due  the  business  for  services  rendered 
others.  It  may  be  stamps,  stationery,  advertising  matter,  etc.,  the  cost  of  which  was  charged  to  the 
Expense  account,  and  debts  due  the  business  for  services  rendered  such  as  the  use  of  our  team  by  others, 
etc.  The  value  of  this  property  must  be  considered  in  making  the  statements.  At  the  close  of  the 
fiscal  period,  each  service  account  must  show  the  true  condition  for  the  period  and  the  value  of  all 
property  must  be  shown  on  the  Financial  statement.  That  this  may  be  done,  a  Sundry  Resource 
Inventories  account  is  opened  and  charged  for  the  value  of  the  property,  and  the  proper  service  ac- 
count credited. 

SUNDRY  RESOURCE  INVENTORIES  ACCOUNT. 

§  194.  The  Object  of  this  Account  is  to  show  the  value  of  property  on  hand  at  the  end  of 
the  fiscal  period  and  debts  due  the  business  for  services  rendered,  but  not  shown  on  the  books.  It 
is  a  statistical  account,  and  used  only  at  the  close  of  the  fiscal  period. 


Debit  Sundry  Resource  Inventories  Account: 

^  I.  For  the  value  of  property  on  hand  at 
the  end  of  the  fiscal  period,  the  value 
of  which   is   not  shown   on   the   books. 

Tf  2.  ¥ov  the  amount  of  debts  due  the*  busi- 
ness for  services  rendered  that  are  not 
shown  on  the  books. 


Credit    Sundry    Resource    Inventories    Account: 

^  3.  For  the  value  of  property  or  services 
debited  to  this  account,  this  entry 
being  made  after  the  ledger  is  closed, 
with  the  object  of  transferring  the 
value  of  the  property  to  the  proper 
service  account. 


'*\\  4.  The  Balance  of  this  Account,  before  the  ledger  is  closed,  will  show  the  value  of  property  on 
hand  at  the  close  of  the  fiscal  period  which  was  not  shown  on  the  books.  It  is  a  resource  and  appears 
in  the  Financial  statement  after  all  of  the  other  resources  have  been  entered.  Current  resources  in- 
cluded in  this  account  may  be  listed  with  other  current  resources,  if  desired. 

^  5.  To  Close  the  Sundry  Resource  Inventories  Account.  This  account  is  closed  by  a  journal  entry 
after  all  the  other  accounts  in  the  ledger  have  been  closed.  The  amounts  charged  to  it  are  trans- 
ferred to  the  proper  service  accounts.  The  name  of  this  account  is  written  in  the  explanation  column 
on  the  credit  side;  the  account  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink. 


Illustration  No.  67.     Sundry  Resource  Inventories  Account. 

§  195.  Sundry  LiabiHty  Inventories.  At  the  close  of  the  fiscal  period  there  are  usually  some 
debts  which  are  owed  by  the  business  but  not  paid,  the  value  of  which  will  be  charged  to  some  service 
account  when  paid.  These  may  include  pay  roll,  rent,  interest,  etc.  It  is  necessary  to  take  these  lia- 
bilities into  consideration  in  making  the  statements.  A  journal  entry  is  made  debiting  the  proper 
service  account  and  crediting  the  Sundry  Liability  Inventories  account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


169 


SUNDRY  LIABILITY  INVENTORIES  ACCOUNT. 

§  196.  The  Object  of  this  Account  is  to  show  the  various  obHgations  owed  by  the  business 
at  the  end  of  the  fiscal  period  but  not  shown  on  the  books.  The  account  is  opened  for  a  statistical 
purp)09e,  and  is  not  used  except  at  the  close  of  the  fiscal  period. 


Debit    Sundry    Liability    Inventories    Account: 


Credit   Sundry   Liability   Inventories   Account: 


1[2. 


For  the  amount  of  any  obligations  owed 
by  the  business  at  the  close  of  the  fiscal 
period   but   not   shown   on    the   books. 


^  I.  For  the  amount  or  amounts  credited  to 
this  account,  this  entry  being  made 
after  the  books  are  closed,  with  the  ob- 
ject of  transferring  the  amounts  to  the 
proper  service  account  or  accounts. 

Iji  3.  The  Balance  of  this  Account  will  show  the  debts  owed  by  the  business  at  the  close  of  the  fiscal 
period  but  not  represented  on  the  books  at  the  time  the  obligation  was  created.  It  is  a  liability,  and 
appears  on  the  Financial  statement  after  all  other  liabilities  have  been  entered. 

^  4.  To  Close  the  Sundry  Liability  Inventories  Account  This  account  is  closed  by  a  journal  entry 
after  all  other  accounts  in  the  ledger  have  been  closed.  The  name  of  the  service  account  or  accounts 
into  which  it  is  closed  is  written  in  the  explanation  column  on  the  debit  side;  the  account  is  ruled 
with  single  and  double  red  lines  and  footed  in  black  ink. 


^'^^^^:^^<i^^0'^^m^^^'i^^ 


Illustration  No.  68.     Sundry  Liability  Inventories  Account. 

§  197.  Trading  Statement.  As  explained  in  §  80,  the  object  of  the  Profit  and  Loss  state- 
ment is  to  show  the  various  profits  and  losses.  One  of  the  principal  profits  is  that  made  by  buying 
and  selling  merchandise  and  is  termed  the  "Gross  Trading  Profit."  As  explained,  this  may  be  shown 
on  the  Profit  and  Loss  statement,  or  in  a  separate  statement,  which  is  known  as  the  Trading  state- 
ment. The  object  of  this  statement  is  to  show  the  gross  trading  profit,  and  is  made  from  the  various 
accounts  that  affect  the  purchases  and  sales  of  merchandise.  To  estimate  the  profit  on  merchan- 
dise, it  is  necessary  to  ascertain  the  net  cost  of  goods  sold,  and  deduct  this  from  the  sales,  which  is 
the  returns  from  goods  sold. 

The  difference  of  the  Purchases  account  shows  the  invoice  cost  of  the  merchandise  bought.  The 
difference  between  the  two  sides  of  the  Freight  In  account  shows  the  freight  charges  on  goods  pur- 
chased. The  difference  between  the  two  sides  of  the  Purchases  Discount  account  shows  the  net  amount 
of  discounts  deducted  by  us  for  prompt  payment  as  per  terms  of  invoices  and  reduces  the  cost  of 
the  merchandise  purchased.  The  net  cost  of  goods  sold  is  the  difference  between  the  net  cost  of  goods 
purchased  during  the  fiscal  period,  plus  the  goods  on  hand  at  the  beginning  of  the  period,  less  the  pres- 
ent inventory,  which  is  the  value  of  the  salable  merchandise  on  hand  estimated  at  cost  price.  The 
difference  between  the  two  sides  of  the  Sales  account  is  the  net  returns  from  sales.  The  gross  trading 
profit  is  the  difference  between  the  net  cost  of  goods  sold  and  the  net  returns  from  sales.  The  first 
part  of  illustration  No.  75  shows  the  form  of  a  Trading  statement. 


170   .  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

EXERCISES  IN  MAKING  THE  TRADING  STATEMENT. 

The  following  exercises  are  given  to  teach  the  student  the  method  of  making  the  Trading  state- 
ment and  the  correct  form,  as  explained  in  §  197  and  shown  in  illustration  No.  75.  These  state- 
ments are  to  be  made  on  journal  paper  and  presented  to  the  teacher  for  approval.  He  will  approve 
these  and  return  them,  as  they  are  required  in  exercise  No.  64. 

EXERCISE  No.  56.  At  the  close  of  the  fiscal  period,  December  31,  191.  .,  the  bookkeeper 
for  W.  R.  Carter  &  Co.  is  required  to  make  a  Trading  statement.  The  accounts  affecting  this  state- 
ment are  as  follows: 

Inventory,  Dr.  (merchandise  on  hand  June  30th,  which  was  the  close  of  the  preceding  fiscal 
period)  $1,586.29;  Purchases,  Dr.  $3,962.97,  Purchases,  Cr.  $518.46;  Freight  In,  Dr.  $429.65;  Pur- 
chases Discount,  Cr.   $286.40;  Sales,  Dr.   $362.99,  Sales,  Cr.  $5,927.84;  Sales  Discount,  Dr.    $196.68. 

The  present  value  of  salable  merchandise  on  hand,  as  shown  by  the  inventory  of  merchandise 
in  stock  December  31st,  is  $1,009.78. 

The  net  returns  from  sales  is  ascertained  by  deducting  the  debit  side  of  the  Sales  account  and 
balance  of  the  Sales  Discount  account,  from  the  credit  side  of  Sales  account.  This  deduction  is  made 
on  the  Trading  statement  because  the  statement  must  show  all  of  the  calculations  necessary  to  ascer- 
tain the  gross  trading  profit.  The  first  entry  on  the  Trading  statement  must  show  the  total  sales. 
In  this  case,  the  amount  is  placed  in  the  first  column.  On  the  line  below  this  write  "Less  merchandise 
returned,"  and  on  the  next  line,  "Sales  Discount;"  enter  the  total  just  beneath  the  sales  and  take 
the  difference  and  enter  it  in  the  second  column  on  the  same  line.  In  the  same  way  the  net  cost  of 
goods  purchased  is  ascertained  by  deducting  the  value  of  goods  returned  by  us  (Purchases  Account, 
Cr.),  and  discounts  deducted  (balance  of  Purchases  Discount  Account),  from  the  total  purchases 
(Purchases  Account,  Dr.).     The  first  part  of  illustration  No.  75  shows  the  correct  form. 

EXERCISE  No.  57.  At  the  close  of  the  fiscal  period,  April  30,  191.  .,  the  bookkeeper  for  C. 
W.  Keeland  &  Co.  is  required  to  make  a  Trading  statement.  The  accounts  affecting  this  statement 
are  as  follows:  Purchases,  Dr.  $5,125.83;  Freight  In,  Dr.  $1,233.97;  Purchases  Discount,  Cr. 
$44.65;  Sales,  Cr.  $4,195.71. 

This  being  the  close  of  the  first  fiscal  period,  there  is  no  Inventory  account.  The  present  value 
of  the  goods  on  hand,  as  shown  by  the  inventory  made  at  the  close  of  the  fiscal  period,  is  $2,945.94. 

EXERCISE  No.  58.  At  the  close  of  the  fiscal  period,  September  30,  191.  .,  the  bookkeeper 
for  Donaldson  Bros,  is  required  to  make  a  Trading  statement.  The  accounts  affecting  this  state- 
ment are  as  follows: 

Purchases,  Dr.  $7,218.70,  Purchases,  Cr.  $295.75;  Sales,  Dr.  $429.86,  Sales,  Cr.  $10,687.49; 
Freight  In,  Dr.  $1,007.26,  Freight  In,  Cr.  $77.98;  Sales  Discount,  Dr.  $218.45,  Sales  Discount,  Cr. 
$10.80;  Inventory,  Dr.  (salable  goods  on  hand  June  30th,  which  was  the  closing  date  of  the  preced- 
ing fiscal  period)  $3,691.87;  Purchases  Discount,  Dr.  $20.00,  Purchases  Discount,  Cr.  $397.86. 

The  present  cost  value  of  merchandise  on  hand,  as  shown  by  the  inventory  of  salable  goods  in 
stock  September  30th,  is  $3,029.82. 

The  net  cost  of  goods  purchased,  and  returns  from  sales  is  shown  on  the  Trading  statement,  as 
explained  in  the  preceding  exercises.  The  difference  of  the  Freight  In,  Sales  Discount,  and  Purchases 
Discount  accounts  are  used,  as  it  is  not  necessary  to  show  the  calculations  necessary  to  ascertain 
the  difference  of  these  accounts. 

EXERCISE  No.  59.  At  the  close  of  the  fiscal  period,  December  31,  191..,  the  bookkeeper  for 
Borches  &  Co.  makes  a  Trading  statement.     The  accounts  affecting  this  statement  are  as  follows: 

Sales,  Dr.  $354.89,  Sales,  Cr.  $12,629.47;  Inventory,  Dr.  (salable  merchandise  on  hand  Sep- 
tember 30th,  which  was  the  close  of  the  preceding  fiscal  period)  $5,291.36;  Freight  In,  Dr.  $1,469.75, 
Freight  In,  Cr.  $180.47;  Purchases,  Dr.  $9,627.84,  Purchases,  Cr.  $150.00;  Purchases  Discount, 
Dr.    $36.50,  Purchases  Discount,  Cr.  $987.62. 

The  present  value  of  salable  merchandise  on  hand,  as  shown  by  the  inventory  of  merchandise 
in  stock  December  31st,  is  $5,742.91. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


171 


TRADING  ACCOUNT. 

§  198.  The  Object  of  this  Account  is  to  show  the  various  costs  of  merchandise  and  returns 
from  sales  for  the  fiscal  period.  It  is  a  statistical  account,  and  is  opened  only  at  the  close  of  the  fiscal 
period,  when  the  ledger  is  closed.  After  the  ledger  is  closed,  it  remains  in  balance  until  the  next  clos- 
ing time. 


Debit  the  Trading  Account: 

^  I.  For  the  cost  of  all  salable  merchandise 
on  hand  at  the  close  of  the  preceding 
fiscal  period,  which  is  the  value  of  mer- 
chandise as  shown  by  the  inventory  at 
that  time. 

\  2.  For  the  difference  of  the  Purchases  ac- 
count, which  is  the  invoice  cost  of  mer- 
chandise purchased,  less  any  that  may 
have  been  returned. 

^  3.  For  the  difference  of  the  Freight  In  ac- 
count, which  is  the  net  amount  paid 
for  freight  on  merchandise  purchased. 

^  4.  For  the  difference  of  the  Sales  Discount 
account,  which  is  the  net  amount  of 
discount  deducted  by  our  customers 
for  prompt  payment  of  obligations. 

^  5.  For  its  own  difference,  the  balance  being 
closed  into  the  Profit  and  Loss  account. 


Credit  the   Trading  Account: 

T[  6.  For  the  cost  of  all  salable  merchandise 
on  hand  at  the  close  of  the  current  fis- 
cal period,  which  is  the  same  as  the 
value  of  the  merchandise,  as  shown  by 
the  present  inventory. 

^  7.  For  the  difference  of  the  Sales  account, 
which  is  the  net  return  from  merchan- 
dise sold. 

^  8.     For  the  difference  of  the  Purchases  Dis- 
count account,  which  is  the  net  amount 
deducted   by   us   for   prompt   payment 
of  obligations. 
(If  the  Trading  account  shows  a  loss,  the. 

difference  would  be  entered  on  this  side  instead 

of  the  debit  side,  as  explained  in  ^  5.) 


^  9.  The  Difference  between  the  two  sides  of  this  Account  is  the  gross  trading  profit,  that  is,  the 
amount  gained  by  purchasing  and  selling  merchandise.  This  difference  is  the  same  as  the  gross  trad- 
ing profit  shown  on  the  Trading  statement.  This  account  is  not  used  in  making  the  Profit  and  Loss 
statement,  but  is  opened  that  the  ledger  may  show  the  detailed  information  shown  on  the  Trading 
statement.  Some  accountants  do  not  use  this,  but  close  these  accounts  direct  into  the  Profit  and  Loss 
account. 

^10.  To  Close  the  Trading  Account.  After  the  Trading  statement  has  been  completed  and  proved 
to  be  correct  by  the  Profit  and  Loss,  and  Financial  statements,  all  the  accounts  which  go  to  make 
up  the  Trading  statement  are  closed  into  the  Trading  account  by  a  journal  entry.  This  entry  opens 
and  closes  the  account,  and  when  it  has  been  posted  the  two  sides  will  be  equal.  It  is  then  ruled  with 
single  and  double  red  lines  and  the  footings  entered  in  black  ink  on  each  side. 


/  1  33 


7  /  /^ 


^30 


'TJT- 


S<:P 


Illustration  No.  69.     Trading  Account. 


172  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  199.  Journal  Entries  Required  at  the  Close  of  a  Fiscal  Period.  At  the  close  of  each 
fiscal  period,  before  the  final  Trial  Balance  is  made,  certain  special  journal  entries  are  required. 
These  will  usually  indicate  the  proper  adjustment  for  insurance  used,  depreciation  on  fixed  invest- 
ments, reserve  for  bad  debts  (§  213),  property  on  hand  or  debts  due  the  business  but  not  shown  on 
the  books,  and  obligations  owed  by  the  business  but  not  shown  on  the  books. 

^  I.  Insurance.  The  Insurance  account  is  charged  with  all  amounts  paid  for  insurance.  At 
the  end  of  the  fiscal  period  it  is  necessary  to  credit  this  account  with  the  insurance  used  and  charge 
the  proper  service  account.  Amounts  paid  for  insurance  on  property  purchased  for  use  in  the  busi- 
ness and  property  purchased  for  sale  is  usually  considered  one  of  the  expenses  of  the  business;  though 
some  accountants  charge  insurance  for  property  purchased  for  sale  to  the  cost  of  that  property.  The 
amount  of  insurance  that  has  been  used  will  be  the  same  proportionate  part  of  the  amount  paid  for 
insurance,  as  the  fiscal  period  is  of  one  year;  thus,  if  the  fiscal  period  is  six  months,  one-half  of  the 
amount  paid  for  insurance  must  be  credited  to  the  Insurance  account;  if  three  months, 
one-fourth  of  the  amount;  if  one  month,  one-twelfth  of  the  amount.  If  a  policy  has  been  issued  dur- 
ing the  period,  only  the  number  of  months  it  has  run  is  considered.  To  adjust  the  insurance  it 
is  necessary  to  make  a  journal  entry  with  one  or  more  debits  and  one  credit.  The  General  Ad- 
ministrative Expense  account  is  debited  with  the  amount  of  insurance  on  property  purchased  for 
use  in  the  business  and  property  for  sale,  and  the  Insurance  account  credited.  Insurance  on  build- 
ings would  be  charged  to  Real  Estate  Expense  and  Revenue  account.  The  first  entry  in  illus- 
tration No.  70  shows  the  correct  form  of  entry  required  at  the  close  of  April. 

^2.  Depreciation  on  Fixed  Investments.  Property  purchased  for  use  in  the  business  must  of 
necessity  decrease  in  value  on  account  of  its  use.  The  amount  of  this  decrease  must  be  considered 
when  the  statements  of  the  business  are  made,  if  the  correct  results  are  to  be  shown.  When  the 
amount  of  depreciation  has  been  ascertained,  the  bookkeeper  must  make  a  journal  entry,  debiting 
the  proper  service  account  and  crediting  the  Reserve  for  Depreciation  account  with  each  kind  of 
property  purchased  for  use  in  the  business.  The  entry  will  require  one  or  more  debits  and  one  or 
more  credits,  depending  upon  the  kind  of  property  purchased  for  use  in  the  business  and  the  service 
accounts  affected  by  the  depreciation.  The  second  entry  in  illustration  No.  70  shows  the  correct 
form  required  at  the  close  of  April.  At  this  time  there  are  three  kinds  of  property  purchased  for  use 
in  the  business,  and  the  depreciation  on  these  affects  two  accounts.  The  use  of  office  equipment 
and  store  fixtures  decreases  the  value  of  these,  hence  increases  the  cost  of  general  administrative 
expense.  The  use  of  delivery  equipment  decreases  the  value  of  this  equipment  and  increases  the  cost 
of  the  selling  expense.     If  a  reserve  is  set  aside  for  bad  debts,  the  entry  is  made  at  this  time  (§  213). 

^  3.  Property  on  Hand.  At  the  close  of  each  fiscal  period,  there  is  usually  some  property  on 
hand,  the  value  of  which  is  not  on  the  books,  and  there  may  be  some  debts  due  the  business 
that  are  not  shown.  These  must  be  considered  in  making  the  statements,  if  the  true  results  are  to 
be  obtained.  When  the  value  of  this  property  is  ascertained,  the  bookkeeper  must  make  a  journal  en- 
try that  will  permit  it  to  be  shown  on  the  books,  hence  included  in  the  statements.  This  journal  entry 
will  require  one  debit  and  one  or  more  credits,  depending  upon  the  kind  of  property  on  hand.  The 
Sundry  Resource  Inventories  account  is  debited,  and  the  proper  service  account  credited,  as  the 
value  of  this  property  always  affects  some  service  account.  The  third  entry  in  illustration  No.  70 
shows  the  correct  form  of  entry  April  30th.  At  this  time  there  is  property  on  hand  consisting  of 
stamps,  stationery,  etc.,  valued  at  $20.00,  and  there  is  an  account  of  $80.00  due  from  Borches  &  Co. 
for  delivery  service.  When  this  entry  is  posted  to  the  ledger,  the  kind  of  property  or  nature  of  the 
services  should  be  written  in  the  explanation  column  in  the  Sundry  Resource  Inventories  account, 
and  the  nature  of  the  property  or  obligation  written  in  the  explanation  column  of  the  service  account 
credited. 

t  4.  Obligations  Owed  by  the  Business.  At  the  close  of  each  fiscal  period  there  may  be  outstand- 
ing obligations  that  do  not  appear  on  the  books.  It  is  necessary  to  take  these  into  consideration,  if 
the  statements  are  to  show  the  true  condition  of  the  business.     After  these  have  been  ascertained 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


173 


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Illustration  No.  70.     Journal  Entries  Required  at  the  Close  of  the  Fiscal  Period, 


174  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

the  bookkeeper  makes  the  journal  entry,  debiting  the  service  account  or  accounts  that  will  be  charged 
when  these  obligations  are  paid,  and  crediting  the  Sundry  Liability  Inventories  account.  The  jour- 
nal entry  will  require  one  or  more  debits,  depending  upon  the  service  accounts  affected,  and  one 
credit.  The  fourth  entry  in  illustration  No.  70  shows  the  correct  form  of  entry  required  April  30th. 
When  this  entry  is  posted  to  the  ledger,  the  nature  of  the  obligation  should  be  written  in  the  expla- 
nation column  in  the  Sundry  Liability  Inventories  account,  and  the  name  of  this  account  written 
in  the  explanation  column  of  the  service  account  debited. 

EXERCISES  IN  JOURNAL  ENTRIES  AT  THE  CLOSE  OF  THE  FISCAL  PERIOD. 

The  following  exercises  are  given  the  student  to  illustrate  the  method  of  making  the  journal 
entries  required  at  the  close  of  the  fiscal  period,  as  explained  in  §  199.  Illustration  No.  70  shows 
the  form  of  making  the  entry.  The  student  is  to  make  these  entries  on  journal  paper  and  present 
to  the  teacher  for  approval. 

EXERCISE  No.  60.  At  the  close  of  the  fiscal  period,  which  extends  from  January  ist  to  April 
30th  of  the  same  year,  the  accounts  affecting  the  journal  entries  are  as  follows:  Office  Equipment, 
Dr.  $466.50;  Store  Fixtures,  Dr.  $204.00;  Delivery  Equipment,  Dr.  $450.00;  Insurance,  Dr.  $49.50; 
5%  depreciation  on  the  fixed  investment  accounts;  Borches  &  Co.  owe  the  business  $80.00  for  de- 
livery services;  stamps,  stationery,  etc.,  on  hand,  $20.00.  Debts  due  by  the  business  not  represented 
on  the  books;  December  rent,  $50.00;  livery  bill  for  board  of  horses,  $70.00. 

EXERCISE  No.  61.  At  the  close  of  the  fiscal  period,  which  extends  from  July  ist  to  December 
31st  of  the  same  year,  the  accounts  affecting  the  journal  entries  are  as  follows:  Office  Equipment, 
Dr.  $500.00 ;  Store  Fixtures,  Dr.  $400.00;  Delivery  Equipment,  Dr.  $600.00;  Insurance,  Dr.  $250.00; 
5%  depreciation  on  the  fixed  investment  accounts.  H.  L.  Mason  owes  the  business  $38.60  for 
delivery  services;  stamps,  stationery,  etc.,  on  hand,  $26.50.  Debts  due  by  the  business  not  rep- 
resented on  the  books:  December  rent,  $60.00;  livery  bill  for  board  of  horses,  $75.00;  pay  roll, 
$36.50.     (§170,  ^i.) 

EXERCISE  No.  62.  At  the  close  of  the  fiscal  period,  which  extends  from  January  1st  to  April 
30th  of  the  same  year,  the  accounts  affecting  the  journal  entries  are  as  follows:  Delivery  Equip- 
ment, Dr.  $750.00;  Office  Equipment,  Dr.  $500.00;  Store  Fixtures,  Dr.  $600.00;  Insurance,  Dr. 
$160.00.  5%  is  to  be  taken  for  the  depreciation  on  Office  Equipment  and  Store  Fixtures,  and  7K% 
from  Delivery  Equipment.  W.  E.  Drummond  owes  us  $46.75  for  delivery  services,  which  will  be 
collected  on  the  first  of  the  month.  There  are  stamps,  stationery,  etc.,  on  hand  valued  at  $40.00. 
Debts  due  by  the  business  and  not  represented  on  the  books:  payroll,  $48.60;  rent,  $100.00;  livery 
bill  for  board  of  horses,  $50.00.  > 

EXERCISE  No.  63.  At  the  close  of  the  fiscal  period,  which  extends  from  January  ist,  191., 
to  June  30th  of  the  same  year,  the  accounts  affecting  the  journal  entries  are  as  foUow^s:  Office 
Equipment,  Dr.  $800.00;  Store  Fixtures,  Dr.  $400.00;  Delivery  Equipment,  Dr.  $1200.00;  Insur- 
ance, Dr.  $200.00.  5%  is  deducted  from  Office  Equipment  and  Store  Fixtures,  and  6%  from  Deliv- 
ery Equipment  for  depreciation;  also  $80.00," which  is  the  value  of  the  horse  that  died  of  overeating. 
(See  note  on  page  143.)  H.  J.  Allen  owes  the  business  $62.50  for  delivery  services;  stamps,  station- 
ery, etc.,  on  hand,  $62.00;  accrued  interest  on  notes  due  the  business,  $32.50.  Debts  owed  by  the 
business  and  not  represented  on  the  books;  rent  for  June,  $100.00;  pay  roll,  $83.60;  accrued  interest 
on  notes,  $38.65;  commission  due  Brownfield  &  Co.  on  a  sale  of  merchandise  made  on  consignment, 
$52.50;  board  of  horses,  $65.80. 

§  200.  Closing  the  Ledger  by  Journal  Entries.  As  explained  in  §  84,  there  are  two  meth- 
ods of  closing  the  ledger — one  with  red  ink  and  the  other  by  journal  entry  or  journal  entries.  The 
method  of  closing  by  red  ink  was  used  in  the  preceding  set.  The  journal  entry  method  will  be  used 
in  this  set.  To  close  the  ledger  by  a  journal  entry  requires  at  least  two  entries — one  to  close  those 
accounts  affecting  the  Trading  statement,  and  the  other  those  accounts  affecting  the  Profit  and  Loss 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


175 


statement.  If  it  is  necessary  to  open  a  Sundry  Resource  Inventories  and  a  Sundry  Liability  Inven- 
tories account,  it  will  require  an  entry  to  close  each  of  these.  The  Capital  account  or  accounts  is 
closed  by  the  use  of  red  ink. 

^  I.  To  Close  Accounts  Affecting  the  Trading  Statement.  After  the  Financial,  Trading,  and  Profit 
and  Loss  statements  have  been  made  and  proved  to  be  correct,  the  accounts  affecting  the  Trading 
statement  are  closed  into  a  Trading  account,  that  the  ledger  may  show  the  same  facts  as  the  Trad- 
ing statement.  This  entry  will  require  two  or  more  debits  and  two  or  more  credits,  depending  upon 
the  number  of  accounts  affecting  the  Trading  statement.  The  first  entry  in  illustration  No.  71  shows 
the  correct  form  for  closing  these  accounts  April  30th.     The  Inventory  account  is  debited  with   the 


^^^^'^^^^^^-^^  ^^^^fi>. 


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Illustration  No.  71.     Journal  Entries  Required  to  Close  the  Ledger. 


176  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

present  value  of  salable  merchandise  on  hand,  as  shown  by  the  inventory  at  the  close  of  the  fiscal 
period ;  the  Sales  account  is  debited  for  the  difference  of  this  account ;  the  Purchases  Discount  account 
is  debited  for  the  difference  of  this  account;  the  Trading  account  is  credited  for  the  total.  This  closes 
all  of  the  accounts  that  will  appear  on  the  credit  side  of  the  Trading  account.  The  Trading  account 
is  debited  with  the  total  of  those  accounts  that  appear  on  the  debit  side;  the  Purchases  account  is 
credited  with  its  difference;  the  Freight  In  account  is  credited  with  its  difference;  the  Profit  and  Loss 
account  is  credited  with  the  difference  between  the  two  sides  of  the  Trading  account,  which  is  the 
same  amount  as  the  gross  trading  profit  on  the  Trading  statement.  When  this  entry  is  posted,  the 
Trading  account  is  not  credited  for  the  one  amount  written  on  the  same  line  with  it,  but  with  each 
of  the  three  amounts  written  in  the  debit  column,  the  name  of  the  accounts  being  written  in  the 
explanation  column.  The  Trading  account  is  not  debited  for  the  one  amount  written  on  the  same 
line  with  it,  but  with  each  of  the  three  amounts  written  in  the  credit  column,  the  name  of  the  accounts 
being  written  in  the  explanation  column.  In  this  way,  the  debit  side  of  the  Trading  account  shows 
all  the  losses  that  appear  on  the  Profit  and  Loss  statement,  and  the  credit  side,  all  the  gains 
that  appear  on  this  statement,  thus  preserving  a  permanent  record  of  the  Profit  and  Loss  statement. 

^  2.  To  Close  Accounts  Affecting  the  Profit  and  Loss  Statement.  After  the  entry  to  close  the  ac- 
counts affecting  the  Trading  statement  has  been  made  and  posted,  the  Profit  and  Loss  account  will 
show  a  credit,  the  amount  of  which  is  the  same  as  the  gross  trading  profit.  It  is  necessary  to  close 
the  other  accounts  showing  a  profit  or  loss  into  the  Profit  and  Loss  account  and  to  transfer  the  bal- 
ance of  this  account  to  the  Capital  account  or  accounts.  This  is  done  by  a  journal  entry,  which  re- 
quires one  or  more  debits  and  two  or  more  credits,  depending  upon  the  number  of  accounts  to  be  closed. 
The  second  entry  in  illustration  No.  71  shows  the  correct  form  for  closing  the  accounts  that  affect 
the  Profit  and  Loss  statement  April  30th.  At  this  time,  there  are  no  other  profits  except  the  gross 
trading  profit.  If  there  had  been,  each  account  showing  a  profit  would  have  been  debited.  There 
are  only  two  accounts  that  show  a  loss,  these  being  the  General  Administrative  Expense  and  the  Sel- 
ling Expense.  The  Profit  and  Loss  account  is  debited  with  the  difference,  and  the  General  Administra- 
tive Expense  account  and  the  Selling  Expense  account  are  each  credited  with  the  amount  with  which 
they  are  debited.  Each  Partner's  Capital  account  is  credited  with  his  share  of  the  net  gain.  When 
this  entry  is  posted,  the  Profit  and  Loss  account  is  not  debited  with  the  one  amount  written  on  the 
line  with  it,  but  with  each  of  the  four  amounts  written  in  the  credit  column,  the  name  of  the  accounts 
being  written  in  the  explanation  column.  The  student  will  observe  that  in  making  this  journal 
entry,  each  account  that  shows  a  profit  on  the  Profit  and  Loss  statement  is  debited,  and  each  account 
that  shows  a  loss  on  this  statement  is  credited,  the  Profit  and  Loss  account  being  debited  with  the 
difference.  If  the  business  has  been  conducted  at  a  loss,  the  Profit  and  Loss  account  would  be  cred- 
ited instead  of  debited. 

^3.  To  Close  the  Capital  Account.  Each  Partner's  Capital  account  is  closed  by  the  use  of  red 
ink,  as  explained  in  §  151,  T[  10.  The  difference,  which  is  the  partner's  present  capital,  is  entered 
on  the  debit  side  in  red  ink  as  follows:  The  date;  the  words  "Present  Capital,"  and  the  amount. 
The  account  is  then  ruled  with  single  and  double  red  lines,  footed  in  black  ink  and  the  Present  Capital 
brought  down  on  the  credit  side  in  black  ink  under  date  of  the  first  day  of  the  new  fiscal  period,  which 
is  the  next  day  after  the  closing.     See  illustration  No.  47. 

^  4.  To  Close  the  Sundry  Resource  and  Sundry  Liability  Inventories  Accounts.  After  the  Cap- 
ital accounts  have  been  closed  and  the  present  capital  brought  down,  a  journal  entry  is  made  to  close 
the  Sundry  Resource  Inventories  and  the  Sundry  Liability  Inventories  accounts  into  the  proper  service 
accounts.  These  accounts  are  opened  for  a  statistical  purpose  only,  and  should  be  closed  before  the 
beginning  of  the  next  fiscal  period.  This  is  done  that  each  service  account  may  show  its  true  value. 
The  journal  entry  will  require  one  or  more  debits  and  one  or  more  credits,  depending  upon  the  number 
of  service  accounts  affected.  Two  distinct  entries  may  be  made  if  desired — one  closing  the  Resource 
Inventories  account  and  another  closing  the  Liability  Inventories  account.  The  student  will  better 
understand   this  method.      Illustration   No.   72   shows  the  correct  form  for  closing  these  accounts 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


177 


April  30th.  As  two  service  accounts  are  affected  by  the  Sundry  Resource  Inventories  account,  the 
first  entry  must  have  two  debits.  When  this  entry  is  posted,  the  Sundry  Resource  Inventories  account 
is  not  credited  with  the  one  amount  written  on  the  same  Hne  with  it,  but  with  the  two  amounts  entered 
in  the  debit  column,  the  name  of  the  accounts  to  which  the  amounts  are  transferred  being  written 
in  the  explanation  column.  As  two  accounts  are  affected  by  the  Sundry  Liability  Inventories  account, 
the  second  entry  requires  two  credits.  When  this  entry  is  posted,  the  Sundry  Liability  Inventories  ac- 
count is  not  debited  with  the  one  amount  written  on  the  same  line  with  it,  but  with  the  two  amounts 
written  in  the  credit  column,  the  name  of  the  account  to  which  the  amounts  are  transferred  being  writ- 
ten in  the  explanation  column.  When  these  entries  have  been  made  and  posted,  the  ledger  is  closed 
and  the  difference  of  each  account  will  show  a  resource,  a  liability,  or  the  Present  Capital,  which 
is  the  condition  that  must  exist  at  the  beginning  of  the  business  or  at  the  beginning  of  each  fiscal 
period. 


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Illustration  No.  72.     Journal  Entries  Required  after  the  Ledger  is  Closed. 


NOTE. — Some  accountants  do  not  close  the  Sundry  Resource  and  Liability  Inventories  accounts  at  the  time  the 
ledger  is  closed,  but  let  these  accounts  close  themselves  as  the  obligations  are  paid,  the  property  consumed,  or  the  debts 
collected.  This  is  not  the  best  practice,  because  the  bookkeeper  must  keep  in  mind  the  debts  or  special  obligations  shown 
by  these  accounts.  It  is  better  to  have  each  service  account  show  the  true  results  at  the  beginning  of  the  fiscal  period. 
If  $50.00  is  due  for  rent,  when  the  proper  entry  has  been  made  and  posted,  the  General  Administrative  Expense  account 
will  show  a  credit  of  $50.00.  Sometime  after  the  beginning  of  the  new  fiscal  period  this  obligation  will  be  paid  and  the 
(jcneral  Administrative  Expense  account  charged.  The  credit  offsets  this  charge  and  permits  the  account  to  show  the 
true  result  at  the  end  of  that  fiscal  period.  If  the  value  of  stamps,  stationery,  etc.,  on  hand  at  the  close  of  the  fiscal 
period  is  $20.00,  the  General  Administrative  Expense  account  will  be  debited  with  this  amount  after  the  proper  entry 
has  been  made,  as  explained  above.  If  no  additional  property  of  this  kind  is  purchased,  and  at  the  end  of  the  new  fiscal 
period  the  value  of  this  property  is  $5.00,  then  the  General  Administrative  Expense  account  would  show  the  correct 
amount  of  this  property  consumed  during  the  fiscal  period.  If  $70.00  is  due  a  livery  company  for  board  of  horses  at  the 
close  of  the  fiscal  period,  the  Selling  Expense  account  would  be  credited  with  $70.00  after  the  correct  entry  has  been  made 
as  explained  above.  When  this  obligation  is  paid  the  Selling  Expense  account  is  debited  because  it  is  a  part  of  the  sell- 
ing expense.  The  credit  offsets  the  debit  and  permits  the  Selling  Expense  account  to  show  the  true  results  at  the  close 
of  that  fiscal  period.  If  $80.00  is  due  us  for  livery  services  rendered  others,  the  Selling  Expense  account  will  be  debited 
with  the  amount  after  the  correct  entry  has  been  made  and  posted.  When  this  amount  is  collected  the  Selling  Expense 
account  is  credited.  The  debit  offsets  this  credit  and  permits  the  account  to  show  the  true  results  at  the  close  of  that 
fiscal  period. 


178  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

While  the  entry  to  close  the  Sundry  Resource  and  Liability  Inventories  accounts  is  not  a  part  of  the  ledger  closing, 
yet  we  have  included  it  in  this,  because  we  believe  the  student  should  learn  to  close  these  accounts  as  explained.  If  he 
learns  to  close  them  at  the  same  time  the  ledger  is  closed,  he  will  form  the  correct  habit  for  the  best  practice  when  he 
goes  into  an  office.     See  Illustrations  Nos.  71  and  72. 


EXERCISES  IN  THE  JOURNAL  ENTRIES  REQUIRED  FOR  CLOSING  THE  TRADING 

ACCOUNTS  INTO  THE  TRADING  ACCOUNT. 

The  following  exercises  are  given  to  teach  the  student  the  method  of  making  the  required  jour- 
nal entry  for  closing  those  accounts  that  are  used  in  making  the  Trading  statement  into  the  Trad- 
ing account,  and  to  close  the  difference  of  this  account  into  the  Profit  and  Loss  account.  These  en- 
tries are  made  on  journal  paper  and  presented  to  the  teacher  for  approval. 

EXERCISE  No.  64.  Make  the  required  journal  entry  to  close  the  accounts  affecting  the 
Trading  statement  into  the  Trading  account  in  exercises  Nos.  56.  57,  58  and  59.  The  first  entry 
in  illustration  No.  71  shows  the  correct  form  of  closing  the  accounts  in  Exercise  57.  When  this 
work  is  presented  to  the  teacher  for  approval,  return  exercises  Nos.  56,  57,  58  and  59. 


EXERCISES  IN  CLOSING  PROFIT  OR  LOSS  ACCOUNTS  INTO  THE  PROFIT  AND  LOSS 

ACCOUNT. 

The  object  of  these  exercises  is  to  teach  the  student  the  method  of  closing  profit  or  loss  accounts 
into  the  Profit  and  Loss  account,  and  this  account  into  the  Investment  account  or  accounts.  The 
entries  are  to  be  made  on  journal  paper  and  presented  to  the  teacher  for  approval.  The  second  entry 
in  illustration  No.  71  shows  the  form  of  entry  and  necessary  explanation. 

EXERCISE  No.  65.  i.  The  accounts  represented  on  the  Profit  and  Loss  statement,  April  30th, 
are  as  follows: 

General  Administrative  Expense,  Dr.  $474.51;  Selling  Expense,  Dr.  $164.50. 

The  gross  trading  profit  (the  amount  with  which  the  Profit  and  Loss  account  is  credited  from 
the  journal  entry  closing  the  Trading  account)  is  $826.50.  The  net  profit  is  closed  into  the  Capital 
accounts  of  C.  W.  Keeland  and  A.  D.  Munson,  each  receiving  one-half. 

By  referring  to  the  second  entry  in  illustration  No.  71  >  the  student  will  note  that  the  Profit  and 
Loss  account  is  debited  for  the  total  credit;  which,  in  this  case,  is  represented  by  only  one  profit, 
and  that  this  account  is  credited  with  the  two  accounts  that  show  a  debit  balance. 

2.    The  accounts  represented  on  the  Profit  and  Loss  statement,  June  30th,  are  as  follows: 

Commission,  Cr.  $269.87;  Interest,  Cr.  $68.45;  General  Administrative  Expense,  Dr.  $581.62; 
Selling  Expense,  Dr.  $309.11. 

The  gross  trading  profit  is  $965.28.  The  net  profit  is  closed  into  A.  H.  Smith's  Capital  account 
and  D.  L.  Robinson's  Capital  account,  each  being  credited  with  one-half. 

This  journal  entry  will  require  three  debits  (one  for  commission,  one  for  interest,  and  one  for 
profit  and  loss),  and  four  credits  (one  for  general  administrative  expense,  one  for  selling  expense, 
one  for  A.  H.  Smith,  and  one  for  D.  L.  Robinson).  The  first  debit  shows  the  amount  with  which  the 
Commission  account  is  credited;  the  second  debit  shows  the  amount  with  which  the  Interest  account 
is  credited;  the  third  debit  shows  the  difTerence  of  the  Profit  and  Loss  account  after  the  credits  have 
been  posted.  The  first  credit  shows  the  amount  with  which  General  Administrative  Expense  is  deb- 
ited; the  second,  credit  shows  the  amount  with  which  Selling  Expense  is  debited;  the  third  credit 
shows  Mr.  Smith's  one-half  of  the  net  profit;  the  fourth  credit  shows  Mr.  Robinson's  one-half  of  the 
net  profit. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  179 


3.  The  accounts  used  in  making  the  Profit  and  Loss  statement,  December  31st,  are  as  follows: 
General  Administrative   Expense,     Dr.   $508.76;   Selling   Expense,     Dr.   $379.65;   Commission, 

Dr.  $98.64;  Interest,    Cr.  $32.71. 

The  gross  trading  profit  is  $1,797.62.  The  net  profit  is  closed  into  C.  W.  Day's  Capital  account 
and  H.  Y.  Joiner's  Capital  account,  each  receiving  one-half  of  the  net  profit. 

This  entry  requires  two  debits  and  five  credits.     See  explanation  under  Exercise  No.  66. 

4.  The  following  accounts  are  used  in  making  the  Profit  and  Loss  statement,  March  31st: 
Real  Estate  Expense  and  Revenue,    Cr.  $156.14;    Commission,  Cr.  $209.46;  General  Adminis- 
trative Expense,    Dr.  $642.75;  Selling  Expense,    Dr.  $217.56;  Traveling  Expense,    Dr.  $204.55;  In- 
terest, Dr.  $36.95. 

The  gross  trading  profit  is  $1,262.78.  The  business  is  owned  by  W.  H.  Andrews,  R.  M.  Staples 
and  J.  C.  Williamson;  each  is  credited  in  his  Capital  account  with  an  equal  part  of  the  net  profit. 

5.  The  following  accounts  are  used  in  making  the  Profit  and  Loss  statement.  May  31st: 
Income  from  Stocks  and  Bonds,  Cr.  $216.44;  Interest,  Cr.  $129.76;  Commission,  Cr.  $155.47; 

General  Administrative  Expense,  Dr.  $846.98;  Selling  Expense,  Dr.  $439.62;  Delivery  Expense, 
Dr.  $207.65;  Traveling  Expense,  Dr.  $298.19;  Advertising,  Dr.  $316.55;  Real  Estate  Expense  and 
Revenue,  Dr.  $296.52. 

The  gross  trading  profit  is  $2,569.83.  The  business  is  owned  by  D.  H.  Miller  and  Samuel  O. 
Davidson.  Each  is  to  receive  an  equal  proportion  of  the  net  profit.  It  is  agreed  that  $200.00  of  the 
profit  will  be  credited  to  each  Partner's  Personal  account  for  withdrawals  and  the  remainder  to  his 
Capital  account. 

This  entry  will  require  four  debits  and  ten  credits;  as  each  Partner's  Personal  account  is  cred- 
ited with  $200.00  and  his  Capital  account  with  the  difference  between  $200.00  and  one-half  the  net 
profit,  these  four  credits,  together  with  the  six  accounts,  which  show  a  debit  balance,  make  the  ten 
credit  entries. 

6.  The  following  accounts  are  used  in  making  the  Profit  and  Loss  statement,  September  30th: 
Real  Estate  Expense  and  Revenue,    Cr.  $316.49;  Interest,    Cr.  $36.52;  General  Administrative 

Expense,  Dr.  $586.90;  Selling  Expense,  Dr.  $432.75;  Commission,  Dr.  $159.46. 

The  gross  trading  profit  is  $729.63.  The  business  is  owned  by  Robert  H.  St.  Paul  and  John  W. 
Mason.     The  profit  or  loss  is  to  be  shared  equally. 

This  entry  will  require  five  debits  and  three  credits.  The  Capital  account  of  each  partner  is 
debited  with  one-half  of  the  net  loss. 

§  201.  Trial  Balance,  April  30th.  As  stated  in  §  66,  the  Trial  Balance  is  a  list  of  all  the  open 
accounts  on  the  ledger,  showing  the  debits  and  credits,  or  balance  of  each.  The  total  of  the  debit 
side  of  the  Trial  Balance  must  be  the  same  as  the  total  of  the  credit  side,  because  the  amounts  deb- 
ited and  credited  in  each  transaction  are  the  same.  Accounts  that  balance  are  not  used  because  the 
two  sides  are  equal.  Use  the  difference  of  the  Partners'  Personal  accounts.  Notes  Receivable,  Notes 
Payable,  accounts  with  Customers  and  Creditors,  and  both  sides  of  all  other  accounts  that  have  debits 
and  credits.  Make  the  Trial  Balance  on  journal  paper,  and  when  approved  by  the  teacher,  copy  it  in 
the  space  arranged  for  Trial  Balances  in  the  journal,  as  instructed  on  the  inside  of  the  front  cover. 
Read  these  instructions  carefully  that  the  accounts  may  be  arranged  in  the  proper  order. 

§  202.  Statement  of  the  Business,  April  30th.  As  explained  in  §  78,  the  statement  of  the 
business  consists  of  three  separate  statements — the  Financial  statement  (§  79),  Trading  statement 
(§  80,  ^  I,  and  §  197),  and    Profit  and  Loss  statement  (§  80). 

(Continued  on  page  18 j.) 


TRIAL  BALAHCE.    C.   W.   KEELAMD  &.C0.,   APRIL  30»   191 


1 

C.  W.  Eeeland  Capital. 

1 

1500 

00 

1 

A.  D.  MojaeoD     " 

1600 

00 

2 

C.  W.  Keeland  Personal, 

40 

00 

2 

A.  D.  UujiBOs 

50 

00 

•^ 

Cash, 

850 

48 

6 

Inventory , 

1121 

74 

6 

Purohases , 

4116 

09 

109 

12 

6 

freight  In, 

1241 

86 

6 

Sales. 

36 

54 

4436 

87 

7 

Purchases  Discount, 

46 

76 

7 

Sales  Discount. 

116 

27 

8 

Interest, 

8 

17 

9 

Commission. 

20 

56 

11 

Insurance, 

46 

37 

12 

General  Administrative  Expense, 

453 

45 

13 

Selling  Expense. 

166 

75 

14 

Reserve  for  Bad  Debts,  5%, 

67 

66 

16 

Real  Estate, 

1000 

00 

15 

Re.al  Estate.  Expense  and  Revenue. 

32 

34 

16 

Office  Equipment, 

466 

50 

16 

Reserve  for  Dep.  of  Office  Equip.  6%, 

23 

33 

17 

Store  Fixtures, 

204 

00 

17 

Reserve  for  Dep.  of  Store  Fixtures,  5%, 

10 

20 

16 

Delivery  Equipment, 

450 

00 

18 

Reserve  for  Dep.  of  Delivery  Equip.  5%. 

22 

50 

20 

Profit  and  Loss, 

67 

66 

24 

Botes  Receivable, 

645 

65 

25 

Botes  Payable, 

2114 

73 

26 

Sundry  Resource  Inventories, 

100 

00 

26 

Sundry  Liability  Inventories, 

120 

00 

y 

Accounts  Receivable, 

1353 

01 

K' 

Accounts  Payable, 

2395 

82 

12465 

71 

12465 

71 

IHVEHTORY.    salable  merchandise  on  hand  April  30th,    $3045.94 
Illustration  No.  73.     Trial  Balance,  April  30th. 

Trial  Balance,  Illustration  No.  yj.  This  contains  all  open  accounts  on  the  ledger,  and  is  made 
after  the  entries  required  at  the  close  of  the  fiscal  period  have  been  made  and  posted.  All  property 
owned  by  the  business,  debts  due  the  business  and  obligations  owed  by  the  business,  together  with 
depreciations  for  wear  and  tear  of  fixed  investments  are  represented  by  accounts.  The  only  property 
not  included  is  the  merchandise  on  hand,  and  this  is  shown  at  the  bottom  of  the  illustration. 

Financial  Statement,  Illustration  No.  74.  This  includes  all  resources  and  liabilities.  The 
depreciations  of  property  purchased  for  use  in  the  business  are  deducted  from  the  cost  value  of 
the  property.  The  difference  between  the  total  resources  and  total  liabilities  is  the  present  capital 
of  the  business.  The  difference  between  this  and  the  investments  at  the  beginning  of  the  business 
is  the  net  gain  for  the  current  fiscal  period,  which  is  divided  equally  between  the  partners.  The 
present  capital  is  the  total  of  each  partner's  present  capital — his  investment  plus  his  share  of  the  profit. 

Trading,  and  Profit  and  Loss  Statement,  Illustration  No.  75.  The  Trading  statement  is  shown 
first.  The  goods  returned  plus  the  discount  allowed  to  customers,  deducted  from  the  returns  from 
sales,  give  the  net  returns  from  goods  sold.  The  cost  of  goods  on  hand  at  the  beginning  of  the 
fiscal  period  plus  the  purchases  (Purchases,  Dr.),  and  freight  in,  gives  the  total  cost  of  goods  pur- 
chased. The  difference  between  this  and  the  value  of  goods  returned,  plus  the  discount  deducted  by 
us,  is  the  net  cost  of  goods  purchased.  The  net  cost  of  goods  sold  is  the  difference  between  the  net 
cost  of  goods  purchased  and  the  cost  of  goods  on  hand  at  the  end  of  the  current  fiscal  period  (Present 
Inventory).  The  gross  trading  profit  is  the  difference  between  the  net  returns  from  sales  and  the  net 
cost  of  goods  sold.  The  difference  between  the  total  losses  and  gains  is  the  net  gain,  each  partner 
being  entitled  to  one-half  of  this.  The  net  gain,  added  to  the  net  investment,  is  the  present  capital, 
which  must  be  the  same  as  the  difference  between  the  resources  and  liabilities  on  the  Financial  state- 
ment.    No  facts  on  either  statement  can  be  accepted  as  correct  until  proved. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


i8i 


FIHABCIAL  STATEMEHT,  C.  W.  KEELAND  &  CO.,  APRIL  30.   191 


RESOURCES 

Cash. 

Inventory.  April  30th, 

Botes  Receivable, 

Accounts  Receivable  (Due  from  Customers)  1353.01 
Less  5^  Reserve  for  Bad  Debts,     67»66 


466.60 
23.53 


204.00 
10.20 


460.00 
22.60 


Real  Estate, 

Office  Equipment, 

Lees  depreciation  5%, 

Store  Fixtures, 

Less  depreciation  55b, 

Delivery  Equipment, 

Less  depreciation  5%, 

Insurance, 

Sundry  Resource  Inventories: 

Stemps  and  Stationery  on  hand,  20.00 

Due  from  Borches  &  Co.    for  delivering,      80.00 

Total  Resources, 

LIABILITIES 

Botes  Payable, 

Accounts  Payable   (Due  Creditors) 

Sundry  Liability  Inventories: 

Rent   of  warehouse  for  April  50.00 

Due  Webb  Livery  Co.   for  board  of  horses, 70.00 

C.   W.   Keeland,    personal, 

A.   D.   Munson,      Personal, 

Total  Liabilities, 

Present   capital   of  the  business. 


C.   W.   Eeelend's   investment. 
Add- one-half  net  gain, 

C.    W.    Keeland 's   present   capital, 

A.    D.    iUunson's    Investment, 
Add- one -half  net  gain, 

A.   D.   Munson '8  present   capital. 


1500.00 
lfifi.3fi 


1600.00 
lfifit36 


850 

3045 

645 

1285 
1000 

433 

193 

427 

46 

100 


48 
94 
66 

35 
00 

17 

80 

50 
37 

00 


2114 
2395 

120 
40 

sa 


1658 


Ifififl 


3316 


73 
82 

00 
00 


36 


3&- 


71 


8037 


26 


4720 


!£. 


3316 


71 


3316 


71 


Illustration  No.  74.     Financial  Statement,  April  30th. 


1 82 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


TRADING,    AHD  PROFIT  AHL  LOSS   STATEMENT.    C.   W.    KEELAHD  &  CO..    APRIL  30.    191 


RETURNS 

Sales, 

Less  Rebates  and  Returns, 

36.54 
116.27 

4436 
152 

87 
61 

4284 

"   Sales  Discount, 

Net  returns  from  merchandise  sold. 

06 

COSTS 

Inventory,  Mdse.  on  haod  April  1st, 
Add  Purohaeee, 
'  Freight  In, 

1121.74 
4116.09 
1241.86 

6478 

69 

Deduct  Kebates  and  Returns, 

109.12 
46.75 

155 

87 

3276 

"    Purchaees  Discount, 

Net  coqt  of  goods  purchased. 
Less  Inventory.  April  30th. 

6322 
3045 

82 
94 

Net  cost  of  goods  sold. 

88 

Gross  Trading  Profit, 

1007 

18 

OTHER  PROFITS 
Interest, 

8 

17 

Conimlssion, 

Total  profits. 

20 

66 

28 

73 

1035 

91 

EXPENSES 

General  Administrative  Expense, 

453.45 

Selling  Expense, 

165.76 

619 

20 

<?Tffep  7'9'?r?r(T? 

67.66 

Reserve  for  bad  debts. 

Real  Estate  Expense  and  Revenue, 

Total  losses. 
Net  Gam, 

32.34 

100 

00 

719 

20 

316 

71 

C.  W.  Keeland  invested. 

1600 

00 

A.  0.  Utinson  invested. 

1600 

00 

C.  W.  Keeland,  one-half  net  gain, 
•*   •*     "     Invested, 

C.  -W.  Keeland 'e  present  capital. 

158.36 
1500.00 

1658 

36 

A.  D.  Munson,  ono-half  net  gain, 
•*  "     "    invested, 

A.  D.  Munson's  present  capital, 

168.36 
1500.00 

1658 

36 

3316 

71 

3316 

71 

Illustration  No.  75.     Trading,  and  Profit  and  Loss  Statement,  April  30th. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  183 


T[  I.  Financial  Statement.  As  explained  in  §  79,  this  shows  all  the  resources,  liabilities  and  the 
present  capital  of  each  partner.  At  this  time  the  resources  consist  of  the  cash  on  hand,  Personal 
accounts  due  the  business,  Notes  Receivable,  Inventory,  Office  Equipment  (cost  value,  less  the  de- 
preciation), Store  Fixtures  (cost  value,  less  depreciation),  Delivery  Equipment  (cost  value,  less  de- 
preciation), and  sundry  resource  inventories,  as  shown  by  the  Sundry  Resource  Inventories  account. 
It  will  be  necessary  to  refer  to  this  account  in  the  ledger  in  order  to  ascertain  the  property  repre- 
sented by  it.  ■  The  liabilities  consist  of  Notes  Payable,  Accounts  Payable,  Sundry  Liability  In- 
ventories, and  Partners'  Personal  accounts,  arranged  in  the  order  mentioned.  The  student  may  omit 
a  list  of  the  accounts  receivable  and  payable,  using  the  total  only.  This  is  ascertained  by  adding 
the  amounts  due  creditors,  and  those  due  from  customers.  Since  these  are  shown  on  the  Trial  Bal- 
ance, and  the  student  retains  a  copy  of  this,  the  teacher  will  know  that  the  various  accounts  are  cor- 
rect, because  the  total  is  correct.  In  preparing  the  Financial  statement  for  a  firm  engaged  in  business, 
the  bookkeeper  would  be  required  to  attach  a  list  of  personal  accounts  to  the  statement.  The  omis- 
sion of  these  in  this  statement  is  to  save  time. 

The  difference  between  the  total  resources  and  total  liabilities  is  the  present  capital  of  the 
business.  As  each  partner  invests  equal  amounts  and  the  profits  or  losses  are  shared  equally,  each 
will  be  entitled  to  one-half  the  present  capital.  The  difference  between  the  total  investment  and  the 
present  capital,  shown  by  the  Financial  statement,  is  the  net  gain  for  the  fiscal  period.  These  facts 
are  shown  on  the  Financial  statement  as  a  proof  of  the  Trading,  and  Profit  and  Loss  statements. 
Illustration  No.  74  shows  the  correct  form  of  the  Financial  statement  for  April  30th.  The  amounts 
are  different,  and  there  are  some  additional  accounts. 

T[  2.  Trading  Statement.  As  explained  in  §§  78  and  197,  the  Trading  statement  shows  the  gross 
trading  profit.  This  is  ascertained  by  using  the  various  accounts  that  affect  the  cost  and  sales  of 
merchandise.  The  total  sales  are  represented  by  the  credit  side  of  the  Sales  account.  If  merchan- 
dise sold  has  been  returned  (debit  side  of  this  account),  the  amount  would  have  to  be  deducted  from 
the  credit  side  to  ascertain  the  net  sales.  The  cost  of  goods  purchased  during  the  fiscal  period  is  shown 
by  the  debit  side  of  the  Purchases  account,  plus  the  debit  side  of  the  Freight  In  account,  less  the 
amount  deducted  for  prompt  payment  of  our  obligations.  If  goods  purchased  had  been  returned, 
the  amount  would  appear  on  the  credit  side  of  the  Purchases  account  and  the  difference  of  this  ac- 
count would  then  show  the  cost  of  the  goods.  If  any  rebates  had  been  allowed  on  freight  charges, 
the  amount  would  appear  on  the  credit  side  of  the  Freight  In  account,  and  the  difference  of  this 
account  would  be  used.  The  deductions  on  the  Purchases  account  would  have  to  be  shown  on  the 
statement,  but  the  difference  of  the  Freight  In  account  could  be  used  without  showing  the  deduc- 
tions if  desired.  The  total  of  the  Purchases  and  Freight  In  account  shows  the  cost  of  the  goods  pur- 
chased during  the  fiscal  period.  The  cost  of  goods  sold  is  ascertained  by  deducting  the  amount  of 
the  inventory,  which  is  the  present  value  of  salable  goods  on  hand.  This  result  gives  the  net  cost 
of  goods  sold.  The  difference  between  the  net  returns  (Sales  account)  from  goods  sold,  and  the  net 
cost  of  the  goods  sold,  is  the  profit  made  by  purchasing  and  selling  goods,  and  is  termed  the  "Gross 
Trading  Profit."  As  explained  in  §§  80  and  197,  the  Trading  statement  is  usually  made  a  part  of  the 
Profit  and  Loss  Statement.  It  is  best  practice  to  do  this,  unless  there  are  a  number  of  accounts 
representing  the  dealings  with  merchandise.  The  first  part  of  illustration  No.  75  shows  the  correct 
form  of  the  Trading  statement,  but  contains  some  accounts  not  represented  April  30th.  At  this  time 
there  is  no  credit  for  merchandise  returned  by  us  or  debit  for  that  returned  to  us.  The  student  should 
have  no  trouble  to  make  his  statement  from  the  form  given, 

^  3.  Profit  and  Loss  Statement.  As  explained  in  §  80,  the  Profit  and  Loss  statement  shows  all 
the  profits  and  losses  and  the  net  gain  of  each  partner.  The  gains  consist  of  the  gross  trading  profit, 
as  shown  by  the  Trading  statement,  which  may  be  made  a  part  of  the  Profit  and  Loss  statement, 
or  as  a  separate  statement,  and  any  profit  or  loss  accounts  that  have  a  credit  balance.  The  losses 
consist  of  profit  or  loss  accounts  which  show  a  debit  balance.  The  gains  are  arranged  with  the  gross 
trading  profit  first,  and  other  profits  afterwards  in  the  order  in  which  the  accounts  appear  on  the 


i84 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Trial  Balance.  The  losses  are  arranged  with  the  General  Administrative  Expense  account  first, 
and  the  other  loss  accounts  in  the  order  in  which  they  appear  on  the  Trial  Balance. 

The  difference  between  the  total  gains  and  total  losses  is  the  net  gain;  this  added  to  the  invest- 
ment must  give  the  Present  Capital,  as  shown  by  the  Financial  statement.  No  facts  on  either  the 
Financial,  Trading,  or  Profit  and  Loss  statements  can  be  accepted  as  correct  until  the  net  gain  shown 
by  the  Profit  and  Loss  statement  proves  with  the  net  gain  shown  by  the  Financial  statement. 

§  203.  Closing  the  Ledger,  April  30th.  As  explained  in  §  84,  the  object  of  closing  the  ledger 
is  to  close  those  accounts  that  show  a  profit  or  loss  into  the  Profit  and  Loss  account,  and  the  balance 
of  this  account  into  the  investment  account  or  accounts.  To  close  a  profit  or  loss  account  means  to 
transfer  the  balance  to  another  account.  The  ledger  may  be  closed  by  the  red  ink  method  (§  84), 
era  journal  entry  or  entries  (§  200).  The  journal  entry  method  will  be  used  in  this  and  succeeding 
sets,  as  it  is  considered  the  best  practice  by  all  accountants. 

As  explained  in  §  200,  it  requires  two  distinct  entries  to  close  the  ledger — one  to  close  the  accounts 
used  in  making  the  Trading  statement,  and  another  the  accounts  used  in  making  the  Profit  and 
Loss  statement.  Since  closing  an  account  means  to  transfer  the  balance  to  another  account,  it  is 
evident  that  the  account  with  a  debit  balance  must  be  credited  and  the  account  into  which  it  is  trans- 
ferred debited,  and  the  account  with  a  credit  balance  debited  and  the  account  into  which  it  is  trans- 
ferred credited. 

^  I.  Entry  to  Close  the  Accounts  Affecting  the  Trading  Statement.  At  this  time  the  Purchases 
and  Freight  In  accounts  show  a  debit  balance  and  the  Sales  and  Purchases  Discount  accounts  a  credit 
balance;  hence,  the  first  two  must  be  credited  and  the  other  two,  debited.  As  the  inventory  or  present 
value  of  merchandise  was  used  in  making  the  Trading  statement  and  reduced  the  cost  of  the  goods 
sold,  it  would  be  considered  as  having  a  credit  balance  and  must  be  debited  in  the  journal  entry. 
As  the  accounts  are  being  closed  into  the  Trading  account,  the  first  part  of  the  entry  requires  three 
debits  (Inventory,  Sales  and  Purchases  Discount)  and  one  credit,  and  the  second  part  of  the  entry 
one  debit  and  three  credits  (Purchases,  Freight  In,  and  Profit  and  Loss  account).  This  entry  not 
only  closes  each  account  affecting  the  Trading  statement  into  the  Trading  account,  but  closes  that 
account  into  the  Profit  and  Loss  account.  The  first  entry  in  illustration  No.  71  shows  the  correct 
form  of  this  entry  and  the  amount.  When  the  amounts  are  posted  to  the  ledger,  the  Trading  account 
is  not  credited  with  the  one  amount  written  on  the  line  with  it,  but  each  of  the  three  amounts  debited 
are  entered  separately,  the  name  of  the  account  being  written  in  the  explanation  column.  In  the 
same  way  the  Trading  account  is  not  debited  with  the  amount  written  on  the  same  line  with  it,  but 
each  of  the  three  amounts  credited  are  entered  separately,  the  name  of  each  account  being  written 
in  the  explanation  column.  Illustration  No.  69  shows  the  correct  form  of  the  Trading  account.  After 
the  entry  to  close  the  accounts  used  in  making  the  Trading  statement  has  been  made  and  posted, 
the  various  accounts  will  balance  and  the  Profit  and  Loss  account  will  show  a  credit,  which  is  the 
amount  of  the  gross  trading  profit.  Each  account  is  ruled,  as  shown  in  illustrations  Nos.  50,  51,  52, 
53,  54,  and  69. 


-W^^Z^^/-.:z^^c^^^^ 


/f 


(^2^^ 


Jo 


/  ^ 


U^f 


a^s 


'3 


##^ 


o 
6 


■^/ 


/f^ 


J^> 


Illustration  No.  76.     Profit  and  Loss  Account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


185 


^  2.  Entry  to  Close  the  Profit  and  Loss  Account.  There  being  no  profit  or  loss  accounts  that 
show  a  credit  balance,  this  entry  will  require  only  one  debit  and  four  credits.  The  Profit  and  Loss 
account  is  debited  for  the  amount  of  all  the  credits,  which  are  the  two  accounts  that  show  losses,  and 
each  partner's  one-half  ot  the  net  gain.  When  this  entry  is  posted,  the  Profit  and  Loss  account  is 
not  debited  with  the  amount  written  on  the  same  line  with  it,  but  each  of  the  four  amounts  credited 
are  entered  separately,  the  name  of  the  accounts  being  written  in  the  explanation  column.  The  sec- 
ond entry  in  illustration  No.  71  shows  the  correct  form  of  the  journal  entry  required  April  30th,  and 
illustration  No.  76  shows  the  Profit  and  Loss  account  after  this  entry  has  been  posted. 

TJ3.  Entry  to  Close  the  Capital  Account.  All  the  accounts  in  the  ledger  used  in  making  the  Profit 
and  Loss  statement  will  now  balance,  and  each  Partner's  Capital  account  will  show  his  part  of  the  net 
gain  for  the  fiscal  period.  The  accounts  are  ruled,  as  shown  in  illustrations  Nos.  57,  58  and  76.  It 
is  not  necessary  to  rule  each  Partner's  Capital  account  and  bring  down  the  present  capital,  but  it  is 
best  to  do  this  so  that  the  account  will  show  the  present  capital  at  the  beginning  of  the  next  fiscal 
period.    These  accounts  are  closed,  as  instructed  in  §  151,    1  10.     See  illustration  No.  47. 

^4.  Entry  to  Close  the  Sundry  Resource  Inventories  Account.  After  the  ledger  has  been  closed, 
it  is  necessary  to  make  a  journal  entry  closing  the  Sundry  Resource  Inventories  account  and  the 
Sundry  Liability  Inventories  account,  that  each  service  account  may  show  the  true  value  at  the  be- 
ginning of  the  next  fiscal  period.  At  this  time  the  Sundry  Resource  Inventories  Account  shows  two 
debits — one  for  the  stationery  on  hand,  and  the  other  the  amount  due  from  Borches  &  Co.  for  delivery 
service.  The  first  amount  affects  the  General  Administrative  Expense  account,  and  the  second  the  Sell- 
ing Expense  account.  To  close  this  account  requires  a  journal  entry  of  two  debits  and  one  credit.  Il- 
lustration No.  72  shows  the  correct  form.  When  the  debit  entry  is  posted,  write  in  the  explanation 
column  of  the  General  Administrative  Expense  account  "Stationery  on  hand,"  and  in  the  Selling  Ex- 
Expense  account  write  "Delivery  Services."  When  the  credit  entry  is  posted,  the  one  amount  is  not 
entered,  but  both  amounts  shown  in  the  debit  entry,  the  name  of  the  accounts  being  written  in  the  ex- 
planation column.  Illustration  No.  67  shows  the  Sundry  Resource  Inventories  account  closed,  and 
illustrations  Nos.  57  and  58  show  the  required  entries  in  the  Expense  accounts.  Rule  the  account 
as  shown  in  illustration  No.  67. 

PROOF  SHEET.   C.  W.  KEELAHD  &  CO. ,  APRIL  30,   191 


1 

C.  W.  Keeland  Capital 

1658 

36 

1 

A.  D.  Muneon     " 

1658 

35 

2 

C.  W.  Keeland  Personal, 

.40 

00 

2 

A.  D.  Munson     " 
Cash, 

850 

48 

,5a 

00 

5 

Inventory, 

3045 

94 

11 

Insurance , 

45 

37 

12 

General  Administrative  Expense, 

20 

00 

60 

00 

13 

Selling  Expense, 

80 

00 

70 

00 

14 

Reserve  for  Bad  uetts. 

67 

66 

15 

Real  Estate, 

1000 

00 

16 

Office  Equipment. 

466 

50 

16 

Reserve  for  Dep.  of  Office  Equipment, 

23 

33 

17 

Store  Fixtures, 

204 

00 

17 

Reserve  for  Dep-  of  Store  Fixtures, 

10 

20 

18 

Delivery  Equipment, 

450 

00 

18 

Reserve  for  Dep.  of  Delivery  Equipment, 

22 

60 

24 

Notes  Receivable, 

645 

65 

26 

Botes  Payable, 
Accounts  Receivable, 
Accounts  Payable, 

1363 

01 

2114 
2395 

73 
82 

8160 

96 

8160 

96 

Illustration  No.  77.     Proof  Sheet,  April  30th. 


1 86 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^  5.  Entry  to  Close  the  Sundry  Liability  Inventories  Account.  At  this  time  the  Sundry  LiabiHty 
Inventories  account  shows  two  credits,  one  for  rent  of  the  warehouse,  and  the  other  for  Hvery 
bill  due  for  board  of  horses.  The  first  affects  the  General  Administrative  Expense  account,  and 
the  second  the  Selling  Expense  account.  To  close  this  account  requires  a  journal  entry  of  one 
debit  and  two  credits.  Illustration  No.  72  shows  the  correct  form.  When  the  debit  entry  is 
posted,  the  Sundry  Liability  Inventories  account  is  not  debited  with  the  one  amount  on  the 
line  with  it,  but  each  amount  in  the  credit  column  is  entered  separately,  the  name  of  the 
accounts  being  written  in  the  explanation  column.  When  the  credit  entries  are  posted, 
in  the  explanation  column  of  the  General  Administrative  Expense  account,  write  "Rent  of 
warehouse,"  and  in  the  explanation  column  of  the  Selling  Expense  account,  write  "Board  for  horses." 
When  this  entry  has  been  posted,  the  Sundry  Liability  Inventories  account  will  balance,  and  is  ruled 
and  footed  as  shown  in  illustration  No.  68. 

§  204.  Proof  Sheet,  April  30th.  As  explained  in  §  90,  the  object  of  the  Proof  Sheet  is  to  prove 
that  the  ledger  is  in  balance  after  all  of  the  accounts  that  require  closing  have  been  closed.  It  is  not 
as  necessary  when  the  ledger  is  closed  by  a  journal  entry  as  when  red  ink  is  used.  However,  the  book- 
keeper should  always  make  a  Proof  Sheet  after  the  ledger  is  closed,  that  he  may  know  his  ledger  is  in 
balance  at  the  beginning  of  the  fiscal  period.  The  Proof  Sheet  consists  of  a  list  of  all  the  open  accounts 
on  the  ledger,  which  are  the  same  as  those  shown  on  the  Financial  statement,  and  the  service  accounts 
affected  by  the  Sundry  Resource  Inventories  and  Sundry  Liability  Inventories. 


QUESTIONS. 


I, 
2. 


9. 
10. 
II. 
12. 

13. 

14. 

15- 
16. 


Define  sundry  resource  inventories.  (§  193.) 
Why  is  it  necessary  to  keep  an  account 

with  these?     (§  194.) 
Name    the    two    special    debits.       (§  194, 

tl  I  and  2.) 
Name  the  special  credit.     (§  194,  1[  3.) 
What   does    the    balance  of    this  account 

show?    (§  194.) 
When  and  how  is  it  closed?     (§  194.) 
Define    Sundry    Liabilities    Inventory. 

t§  195.) 
Why  is  it  necessary  to  open  special  ac- 
counts for  these?     (§  196.) 
When  is  this  account  opened  and  closed? 
Name  the  special  debits.     (§  196,  ^  i.) 
Name  the  special  credits.     (§  196,  ^  2.) 
Define   the  Trading   statement.      (§  197.) 
What    accounts     affect    this    statement? 
What   is   the   object   of   the   Trading   ac- 
count?    (§  198.) 
For  what  is  it  debited?     (§  198,  ^^  i — 5.) 
For  what  is  it  credited?   (§  198,  ^ij  6—8.) 


17- 


19. 


20. 
21. 


22. 


23- 


24. 


25- 


26. 


27. 


What  does  the  balance  of  the  Trading 
account  show?     (§  198.) 

How  and  when  is  it  closed?     (§  198.) 

Name  the  four  special  journal  entries 
usually  required  at  the  close  of  a  fiscal 
period.     (§  199.) 

Explain  why  these  are  necessary.     (§  199.) 

What  is  meant  by  closing  the  ledger  by 
journal  entries?     (§  200.) 

Describe  the  two  entries  usually  required. 
(§  200,  1[1[  1—4.) 

How  is  the  Capital  account  or  accounts 
closed?     (§  200,  If  3.) 

Describe  the  method  of  taking  the  Trial 
Balance  April  30th.      (§  201.) 

Describe  the  method  of  making  the  state- 
ment at  the  close  of  the  fiscal  period, 
April  30th.     (§  202.) 

Describe  the  method  of  closing  the  led- 
ger, April  30th.     (§  203,  TlTl  I — 4.) 

Describe  the  Proof  Sheet,  April  30th. 
(§  204.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  187 


JOURNAL  ENTRIES— PARTNERSHIP. 

EXERCISE  No.  66.  i.  W.  H.  Rankin  and  Chas.  O.  Watkins  form  a  partnership  for  the 
purpose  of  engaging  in  the  retail  shoe  business.  Mr.  Rankin  invests  his  present  stock  of  goods, 
valued  at  $2,684.73.  Personal  accounts  due  him,  $1,274.28,  less  2%  for  bad  debts  (§  213);  a  note 
due  him  for  $375.60;  accumulated  interest  on  this,  $3.76;  oflfice  equipment,  cost  value,  $447.65; 
depreciation  on  the  same,  $44.77  (§  163,  ^4);  store  fixtures,  $650.00;  depreciation  on  the  same, 
$65.00  (§  165,  ^4);  cash  in  the  bank  to  his  credit,  $1,427.65;  he  owes  personal  accounts,  $2,176.48; 
a  note  for  $1,000.00. 

Mr.  Watkins  invests  cash,  $2,000.00;  a  note  in  his  favor,  $1,500.00;  accumulated  interest  on 
this  note,  $27.65. 

Debit  each  account  representing  the  value  of  property  invested  by  Mr.  Rankin;  credit  each  ac- 
count representing  the  debts  assumed  by  the  partnership,  and  credit  Mr.  Rankin's  Cai)ital  account 
for  the  difference.  The  Accounts  Receivable  account  is  debited  with  the  total  amount  due  from  custom- 
ers, and  Reserve  for  Bad  Debts  account  credited  for  the  reserve.  The  Office  Equipment  and  Store 
Fixtures  accounts  are  each  debited  for  the  cost  value  of  the  property  and  a  Reserve  for  Depreciation  ac- 
count with  each  is  credited  for  the  depreciation.  Debit  each  account,  which  will  represent  the  value 
of  the  property  invested  by  Mr.  Watkins,  and  credit  his  Capital  account  for  the  total. 

2.  J.  B.  Andrews  drew  a  ten-day  draft  for  $500.00  on  C.  W.  Bayless  in  favor  of  Anderson  Bros., 
and  sent  it  to  them  to  apply  on  account.  Make  the  journal  entry  that  each  party  would  make  on 
his  books. 

3.  W.  E.  Drummond  and  J.  S.  Martin  form  a  partnership  for  the  purpose  of  engaging  in  the 
retail  grocery  business.  Mr.  Drummond  invests  cash,  $1,500.00;  a  note  for  $500.00;  accumulated 
interest  on  this,  $4.75;  an  account  due  from  William  Ferguson  for  $27.89. 

Mr.  Martin  invests  cash,  $2,000.00;  stock  of  merchandise  valued  at  $861.95;  an  account  due  him 
from  C.  C.  DeArmond  for  $96.87;  store  fixtures  valued  at  $500.00;  depreciation  on  the  same,  $75.00; 
office  equipment  valued  at  $450.00;  depreciation  on  the  same,  $57.50.  Make  the  required  journal 
entries,  as  instructed  in  No.  i. 

4.  Bought  from  the  Mosley  Safe  &  Lock  Company  a  fireproof  safe  for  $500.00;  paid  for  it  by 
check,  $100.00,  and -four  notes  for  $100.00  each,  due  in  30,  60,  90  and  100  days,  respectively.  Make 
the  required  journal  entries. 

5.  W.  H.  Armstrong  and  C.  L.  Whittle  form  a  partnership  for  the  purpose  of  engaging  in  the 
retail  hardware  business.  Mr.  Armstrong  invests  cash  in  the  bank,  $387.62;  merchandibe  in  stock, 
$2438.26;  personal  accounts  due  him,  $972.40;  reserve  for  bad  deb)ts,  2%  ;  office  ecjuipment,  cost  value, 
$350.00;  depreciation  on  the  same,  $35.00;  store  fixtures,  $475.00;  depreciation  on  the  same,  $47.50; 
notes  receivable,  $675.27;  accumulated  interest  on  the  same,  $36.20;  the  partnership  assumes  per- 
sonal accounts  which  he  owes,  $942.76;  a  note  due  the  First  National  Bank  for  $1,000.00;  accumu- 
lated interest  on  this,  $20.00.  Mr.  Whittle  invests  cash,  $1,427.86;  merchandise  in  stock,  $1,360.48; 
personal  accounts  due  him,  $843.65;  reserve  for  bad  debts,  2%  ;  delivery  equipment,  cost  value,  $850.00; 
depreciation  on  the  same,  $85.00;  notes  receivable  due  him,  $1,265.74;  accumulated  interest  on  the 
same,  $82.75;  he  owes  personal  accounts,  $365.40;  a  note  due  the  City  National  Bank,  $500.00.  Make 
the  required  journal  entries,  as  explained  in  No.  i. 

6.  Accepted  a  ten-day  draft  drawn  by  the  American  Tobacco  Company  for  $968.92  in  part 
payment  of  an  invoice  due,  less  3%  discount.     Make  the  required  journal  entry.     (§  188.) 

7.  Purchased  from  the  Hall  Safe  &  Lock  Company  a  new  fire  and  burglar-proof  safe  for  $600.00; 
paid  for  the  same  by  exchanging  a  second-hand  safe,  which  cost  us  $200.00;  cash,  $250.00,  and  two 
notes  for  $100.00,  each  due  in  60  and  90  days,  respectively.     Make  the  required  journal  entry. 

8.  C.  W.  Brown  owes  us  $927.82,  which  is  subject  to  3%  if  paid  in  ten  days.  He  agreed  to  ac- 
cept our  ten-day  draft  in  payment  of  same,  less  discount.  Make  the  journal  entry  as  though  the 
draft  had  been  accepted. 


i88  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

9.  C.  B.  Dodson  &  Co.  drew  a  thirty-day  draft  for  $327.46  on  A.  L.  Young  and  sent  it  to 
Jones  Bros,  to  apply  on  account.  Make  the  journal  entry  each  of  the  parties  would  make  on  his  books, 
assuming  that  the  draft  was  accepted  when  presented. 

10.  July  I,  191 .  .,  C.  H.  Jordan,  A.  L.  Peer  and  W.  D,  Dunsmore  form  a  partnership  for  the 
purpose  of  engaging  in  the  retail  drug  business.  Mr.  Jordan  invests  cash,  $1,000.00;  a  note  for 
$627.65,  dated  May  5th,  and  due  in  four  months,  with  interest  from  date;  a  note  for  $522.75,  dated 
March  6th,  and  due  in  six  months,  with  interest  from  date,  with  a  credit  of  $105.87,  paid  May  27th; 
an  account  due  him  from  W.  W.  Watson  for  $256.37.  Mr.  Peer  invests  cash,  Ji, 500.00;  a  note  for 
$1,250.00,  dated  March  3d,  and  due  in  eight  months,  with  interest  from  date,  on  which  there  is  a  pay- 
ment of  $300.00,  dated  May  6th.  Mr.  Dunsmore  invests  the  resources  and  liabilities  of  his  present 
business,  which  are  as  follows: 

Cash,  in  the  bank,  $272.80;  accounts  due  him,  $546.50;  depreciation  for  bad  debts,  3%;  office 
equipment,  cost  value,  $250.00;  reserve  for  depreciation,  $15.00;  store  fixtures,  $360.00;  deprecia- 
tion, $18.00;  notes  receivable,  $562.75;  merchandise  in  stock,  $739.80. 

He  owes  $462.75  to  persons  from  whom  he  has  purchased  merchandise  on  time,  and  the  City 
National  Bank  a  note  for  $450.00.     Make  the  required  journal  entries,  as  explained  in  No.  i. 

11.  Accepted  Adcock  &  Jordan's  ten -day  draft  in  payment  of  an  invoice  for  $927.89,  less  3%. 
Make  the  required  journal  entry. 

12.  The  bookkeeper  for  A.  D.  Upland  &  Co.,  engaged  in  the  retail  lumber  business,  used  the 
following  facts  for  making  his  statements  April  30th:  Robert  Clark,  Capital,  Dr.  $869.50,  Cr. 
$5,000.00;  A.  D.  Upland,  Capital,  Cr.  $5,000.00;  A.  D.  Upland,  Personal,  Dr.  $86.42;  Inventory, 
Dr.  $1,865.72;  Purchases,  Dr.  $6,281.75,  Cr.  $367.82;  Freight  In,  Dr.  $1,265.74;  Sales  Discount, 
Dr.  $329.46 ;  Sales,  Dr.  $427.62,  Cr.  $8,197.98;  Purchases  Discount,  Cr.  $299.78;  Delivery  Equipment, 
Dr.  $782.95;  Reserve  for  Depreciation  of  Delivery  Equipment,  Cr.  $78.30;  Office  Equipment,  Dr. 
I255.75;  Reserve  for  Depreciation  of  Office  Equipment,  Cr.  $25.58;  Notes  Payable,  Cr.  $1,500.00; 
Interest,  Dr.  $25.69,  Cr.  $19.81;  Notes  Receivable,  Dr.  $691.87;  Real  Estate,  Dr.  $3,500.00;  Real 
Estate  Expense  and  Revenue,  Dr.  $262.75;  General  Administrative  Expense,  Dr.  $586.27;  Selling 
Expense,  Dr.  $369.44;  Accounts  Receivable,  Dr.  $2,561.14;  Reserve  for  Bad  Debts,  Cr.  $51.22; 
Insurance,  Dr.    $75.85;  Accounts  Payable,  Cr.  $1,692.92;  Cash  Balance  on  hand.  Dr.  $1,995.49. 

The  present  value  of  lumber  in  stock  is  $2,137.98.  Make  the  Trading,  Financial,  and  Profit 
and  Loss  statements. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


189 


MAY 

A  continuation  of  the  April  business  introducing  the  use  of  the  accounts  explained  in  April — 
Credit  Bills;  Bills  of  Lading;  Telegrams;  Certified  Checks;  Instructions  for  Detecting  Errors  in  the 
Trial  Balance;  Collecting  Notes  and  Drafts;  Correcting  Errors;  Exchange,  and  Information  Rela- 
tive to  Admitting  a  Partner. 

§  205.  Credit  Bill.  A  credit  bill  is  a  statement  sent  to  the  buyer  by  the  seller,  showing  that 
his  account  has  been  credited  for  the  value  of  the  item  or  items  described  therein.  It  is  the  same 
as  a  receipt,  except  more  definite  information  is  given.  A  credit  bill  may  be  sent  for  cash  remittances, 
discrepancies  in  goods  shipped,  errors  in  extensions  of  bills,  or  any  other  facts  that  require  credit. 
The  form  is  similar  to  that  of  an  invoice  or  bill.  The  credit  bill  should  be  printed  in  a  different  color 
ink  from  that  of  a  bill,  to  distinguish  between  them.  Illustration  No.  78  shows  a  popular  form  of  the 
credit  bill. 


CREDIT  BILL 


C.  W.  KEELAND  dc  CO. 

DEALERS  IN 

HAY.  GRAIN.  FEED 
AND  COAL 


"^^g^;^  /^/ 


^.^'^(PrP^y^Zrr^^    C^r;^'?'^yf^^.^?-^^i^fi<^J 2^. 


.^ 


^^ 


Z<^^:^^^^:^1:::ZI^1;2 


'^T^- 


'^<t^^U 


JZ^^     ^'^g^- 


■^ 


..^ 


Illustration  No.  78.     Credit  Bill. 


§  206.  Bill  of  Lading.  When  merchandise  is  shipped  by  freight,  the  shipper  requires  a  re- 
ceipt from  the  railroad  company  for  the  shipment.  This  receipt  is  a  bill  of  lading.  Bills  of  lading 
are  made  in  triplicate  and  supplied  to  the  shipper  by  the  railroad  company.  Some  shippers  prepare 
their  own  form  and  use  this  instead  of  the  one  supplied  by  the  railroad.  Practically  all  of  the  rail- 
road companies  do  business  in  more  than  one  state,  hence  are  under  the  jurisdiction  of  the  Inter- 
state Commerce  Commission.  Recently  the  Commission  made  a  ruling  that  bills  of  lading  should 
be  of  a  standard  size  and  contain  standard  regulations.  This  was  to  avoid  the  numerous  forms  in 
use,  each  railroad  company  having  its  own  form.  This  ruling  does  not  prohibit  the  shipper  from 
preparing  his  own  form,  provided  it  complies  with  the  requirements  imposed  by  the  Commission. 

Bills  of  lading  are  made  in  triplicate,  that  the  railroad,  shipper,  and  consignee  may  each  have 
a  copy.     By  using  two  sheets  of  carbon  paper,  the  same  facts  can  be  written  on  each  form  with  only 


For  use  in  connection  with  the  Standard  form  of  Straight  Bill  of  Lading  approved  by  the  Interstate  Commerce  Commission  by 
Q  Order  No.  787  of  June  27,  1908. 

..Railroad  Company  Shipper*  No 

TOIC  MpMOR  ANnUM  '^  an  acknowledgment  that  a  bin  of  ladmg  has  been  issued  and  is  not  the  Original  Bill  of  Lading  nor 

*  "»»J  1T11j1T1\/I\/*Ii  If  \J  ITl  a  QQpy  or  duplicate,  covering  the  property  named  herein  and  is  intended  solely  for  filing  or  record.  Agents  No . 

RECEIVED,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of   the  receipt  by  the  carrier  of  the   property   described  in   the 
Original  Bill  of  Lading. 


at  208  Commerce  St.. 


191 


C.  W.  KEELAND  &  CO., 


Illustration  No.  79.     Third  Form  of  Bill  of  Lading 


For  use  in  connection  with  the  Standard  form  of  Straight  Bill  of  Lading  approved  by  the  Interstate  Commerce  Commission  by 
O  Order  No.  787  of  June  27,  1908. 


THIQ  CHIPPINP   HDriFR    must  be  legibly  filled  in,  in  Ink,  in  indelible  Pencil 

I  niO    Onir  r  lllU    V/IVl/ civ    „r  ;„  rarhon  and  rptainpd  hv  the  Airpnt. 


or  in  Carbon  and  retained  by  the  Agent. 


.Railroad  Company  Shippers  No. 

Agents  No.. 


RECEIVED,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of  issue  of  this  Shipping  Order. 


From 


at  208  Commerce  St. 191 


C.  W.  KEELAND  &  CO., 


Illustration  No.  80.     Second  Form  of  Bill  of  Lading. 


Uniform  Bill  of  Lading— Standard  form  of  Straight  Bill  of  Lading  approved  by  the  Interstate  Commerce  Commission  by 
"I  Order  No.  787  of  June  27,  1 908. 

B.    8c    0.    S.    W.  Railroad  Company     Shippers  No 

StMiMt  BILL  OF  LADING  Agenu  No 


RECEIVED,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of  issue  of  this  Original  Bill  of  Lading. 


C.  W.  KEELAND  &  CO., 


,.  p.  From 

at  208  Commerce  St ^^^    ^  »  191  -     , 

The  property  described  below,  in  apparent  good  order,  except  as  noted  (contents  and  condition  of  contents  of  packases  unknown) ,  marked, 
consigned  and  destined  as  indicated  below,  which  said  Company  agrees  to  carry  to  its  usual  place  of  delivery  at  said  destination,  if  on  its  road, 
otherwise  to  deliver  to  another  carrier  on  the  route  to  said  destination.  It  is  mutually  agreed,  as  to  each  carrier  of  all  or  any  of  said  property 
over  all  or  any  portion  of  said  route  to  destination  and  as  to  each  party  at  any  time  interested  in  all  or  any  of  said  property,'that  every  service 
to  be  perfonned  hereunder  shall  be  subject  to  all  the  conditions,  whether  printed  or  written,  herein  contained  (including  conditions  on  back 
hereof),  and  which  are  agreed  to  by  the  .shipper  and  accepted  for  himself  and  his  assigns. 


The  rate  of  Freight  from 

to 

Pi  1 1  sburgh ^^  .^  _^^  ^^^.  ^,,  ^,^     - 

IF  Special 
per 

IF  Special 

IF...Times  Istl  IF  1st  Class  1  IF  2d  Class 

IF  Rule  25 

IF  3d  Class 

IF  Rule  26  |    IF  Rule  28   |  IF4th  Class  |  IF  5th  Class    IF  6th  Class 

per 

1 

1                      '                      i 

W.    H.    Ingram 


(.Mail  address — Not  for  purposes  of  Delivery.) 

^      .      ^  ...    X..     .x.^.^...  1873    Elm    St. 

Consigned  to 

r,   ,.    ,.  Pittsburgh  _   ^     ,  Penna.    „      ^     .     Allegheny 

Destination, - btate  or County   or  ?r? •'.... 

Your   line  ^     ,  . .  ,  r>    ki 

Route, Car   Initial Car  No. 


No. 
Packages 

Description  of  Articles  and  Special  Marks 

Weight 
(Sub.  to  Cor.) 

Class  or 
Rate 

Check 
Cohimn 

If  charges  are  to  be  prepaid, 
write  or  stamp  here,  "To  be 
prepaid." 

60 

scks.    #1   Corn 

6082# 

60 

'•        #2   Corn 

6114# 

Received  $ 

to  apply  in  prepayment  of  the 
charges  on  the  property  de- 
scribed hereon. 

60 

"        Oats 

3849# 

Agent  or  Cashier. 

Per 

Icaowledgcs  only  the  amount 
prepaid.) 

Charges  Advanced: 

$ 

C.  W.  KEELAND  &  CO..  Shipper,  Per . 


B 


-Agent,  Per_ 


(This  Bill  of  Lading  is  to  be  signed  by  the  shipper  and  agent  of  the  carrier  issuing  same.) 
Illustration  No.  81.     First  or  Original  Form  of  Bill  of  Lading, 

NOTE — That  part  of  illustrations  Nos.  79  and  80,  forms  2  and  3,  not  shown,  is  the  same  as  the  lower  part  of  illus- 
tt^tion  No.  81,  form  i. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  191 


one  writing.  Bills  of  lading  are  bound  in  book  form  or  pads  and  arranged  in  sets  of  three.  The  Com- 
mission designated  the  color  of  paper  to  be  used  for  each  form,  but  left  this  optional  with  the  rail- 
road company  or  shipper  as  to  whether  these  colors,  or  white  should  be  used.  The  white  has  proven 
the  most  popular.  Illustrations  Nos.  79,  80  and  81  show  the  three  forms  required  by  the  Interstate 
Commerce  Commission.  The  correct  size  required  by  the  Commission  is  8}4  inches  wide  and  7 
inches  long,  or  8}4  inches  wide  and  11  inches  long. 

§207.  Telegram.  A  telegram  is  a  communication  or  message  sent  by  a  telegraph  company. 
There  are  two  leading  companies  in  the  United  States,  the  Postal  and  Western  Union.  While  the 
government  maintains  mail  service  to  all  parts  of  the  country,  yet  it  does  not  provide  as  prompt 
service  as  is  required  in  modern  business.  The  telegraph  companies  are  organized  for  the  purpose 
of  rendering  quick  service  in  communication.  The  capital  invested  is  used  to  provide  the  necessary 
equipment,  which  includes  poles,  wires,  batteries,  fixtures,  etc. ;  to  maintain  offices  and  pay  employees 
for  their  services.  The  profit  is  derived  from  receiving  more  for  transmitting  a  message  than  the 
cost  of  the  message.  The  charges  for  a  message  are  based  on  the  distance  and  the  number  of  words 
in  excess  of  ten.  If  the  rate  for  sending  a  telegram  from  one  point  to  another  is  fifty  cents,  it  will 
cost  just  as  much  to  send  ten  words  as  any  number  of  words  less  than  ten.  A  fixed  charge  is  made 
for  each  word  in  excess  of  ten. 

There  are  three  classes  of  telegrams:  the  regular  day  message,  day  letter  and  night  letter. 

^  I.  The  Regular  Day  Message.  The  regular  day  message  consists  of  ten  or  more  words,  unless 
the  sender  uses  less  words  than  ten,  and  is  sent  as  soon  as  received  or  in  regular  order.  It  is  delivered 
at  its  destination  as  soon  as  received  or  in  regular  order.    The  charge  is  based  on  ten  words,  as  explained. 


POSTAL  TELEGRAPH  -  COMMERCIAL  CABLES  1 

THOMAS  W.  BAKER.   President. 
RECEIVED  AT  ^^^  ^^^  ^^^    ^^     ^^^       ^       ^     ^  DELIVERY  NO. 

TELEGRAM 

The  Postal  Telegraph-Cable  Company  (Incorporated)  transmits  and  delivers  this  message  subject  to  the  terms  and  conditions  printed  on  the  back  of  this  blank. 


May  12.   191 

Short  Bros. 

Cleveland, 
number   one   corn  sixty  seven  cents  bushel   f.    o.   b.    cars  here. 

C.   W.   KEELAHD  &  CO. 
Illustration  No.  82.     Regular  Day  Message  of  Ten  Words. 

^f  2.  Day  Letter.  The  day  letter  consists  of  a  message  of  fifty  words,  and  is  accepted  by  the 
telegraph  company  at  a  reduced  price,  because  it  is  not  to  be  sent  until  all  regular  day  messages 
have  been  sent.  It  is  delivered  at  destination  after  the  regular  day  messages  have  been  delivered. 
The  regular  messages  have  preference  over  the  day  letters  and  are  always  delivered  first.  If,  at 
the  time  the  day  letter  is  received,  there  are  no  regular  messages  to  be  sent,  it  will  be  sent  as  soon 
as  received;  if  there  are  no  regular  day  messages  to  be  delivered  at  the  destination,  it  will  be  delivered 
as  soon  as  received.  The  charges  on  the  day  letter  are  based  on  a  message  of  fifty  words.  If  less  words 
are  included  in  the  message,  the  cost  is  the  same.  If  more  words,  a  fixed  charge  is  made  for  each 
additional  word. 


192  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

H  3-  Night  Letter.  A  night  letter  is  a  message  of  fifty  words  and  is  to  be  sent  at  night.  The 
rate  is  the  same  as  ten  words  sent  by  the  regular  day  message.  The  message  is  received  by  the  com- 
pany with  the  understanding,  that  it  is  to  be  sent  sometime  during  the  night  and  delivered  early 
the  next  morning,  either  by  a  messenger  of  the  company  or  by  mail.  The  charge  is  based  on  fifty 
words,  the  same  as  the  day  letter.  If  additional  words  are  used,  a  fixed  charge  is  made  for  each 
word. 

NIGHT    LETTER 

THE  WESTERN   UNION   TELEGRAPH   COMPANY 

INCORPORATCP 

25.000  OFFICES   IN   AMERICA  CABLE  SERVICE  TO  ALL  THE  WORLD 

f^OBCRT  C.   CLOWRV.    PRESiOCNT  BELVIDERE    BROOKS.    GCNERAl   MANAGER 


RECEIVER'S  No. 


TIME   FILED 


Send   the  following  NIGHT  LETTER  subject  to      |  Jflj^-y    ^4         191 

the  terms  on  back  hereof    which  are  hereby  agreed  to  »  — ^ J'  ♦  * 

Anderson,  Peck  &  Fowler, 
Clinton.  N.  Y. 

Ship,  at  once,  by  faet  freight  one  car  number  one  Corn  to  Short' 
Brothers,  Cleveland,  and  one  car  number  one  Hay  to  W.  R.  Ingrain, 
Pittsburg.   Send  bill  of  lading  showing  freight  rate  to  consignee. 
Send  invoice  to  us  and  charge  to  our  account.   Advise  freight  rate. 

C.  W.  KEELAND  &  CO. 

Illustration  No.  83.     Night  Letter. 

NOTE. — A  message  of  ten  words  sent  at  night  and  delivered  under  the  same  conditions  as  the  night  letter,  is  accepted 
at  a  less  rate  than  the  regular  day  message.  These  are  not  very  popular  since  the  inauguration  of  the  night  letter, 
because  there  is  very  little  difference  in  the  charge  and  five  times  the  number  of  words  may  be  sent. 

§  208.  Certified  Check.  A  certified  check  is  one  which  the  bank  has  guaranteed.  An  ordi- 
nary check  is  evidence  that  the  party  who  drew  it  has  the  amount  of  money  on  deposit  in  the  bank 
on  which  it  is  drawn,  but  the  one  to  whom  it  is  given  has  no  means  of  knowing  that  this  fact  is  cor- 
rect, except  by  presenting  it  for  payment.  That  the  person  to  whom  the  check  is  given  may  be  as- 
sured that  it  is  all  right,  the  maker  will  present  it  to  the  teller  of  the  bank  and  have  him  certify 
that  he,  the  maker,  has  on  deposit  a  sufficient  amount  to  pay  the  check.  As  a  general  rule,  checks 
are  not  certified,  being  accepted  by  the  parties  to  whom  they  are  given  for  the  same  amount  of  cash, 
but  sometimes  it  is  the  best  policy  not  to  accept  a  check  unless  it  is  certified. 

If  a  person  who  is  not  acquainted  with  anyone  in  the  bank  wishes  to  open  an  account,  he  should 
provide  himself  with  a  letter  of  introduction  from  his  former  banker  and  a  certified  check  for  the 
amount  which  he  wishes  to  deposit,  unless  he  opens  his  account  with  cash  or  currency. 

If  a  note  is  payable  at  a  bank  other  than  the  one  at  which  the  maker  does  business,  he  should 
have  his  check  certified  when  he  pays  the  note.  If  it  is  certified,  the  bank  holding  the  note  will  know 
that  his  check  will  be  honored  when  presented. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


193 


If  the  person  in  whose  favor  an  individual  check  is  made  Hves  in  some  other  city,  it  is  good  policy 
to  have  the  check  certified,  especially  if  the  check  is  not  sent  in  the  regular  order  of  business.  The 
person  to  whom  the  check  is  made  payable  may  have  it  certified  if  desired.  A  certified  check  is  as 
good  as  the  credit  of  the  bank.  If  the  bank  should  become  insolvent,  the  holder  of  the  certified  check 
could  collect  only  the  same  as  other  creditors.  When  a  check  is  certified  the  amount  is  charged  to 
the  depositor  the  same  as  if  it  had  been  paid.  It  is  necessary  for  the  bank  to  do  this,  since  a  certi- 
fied check  means  that  the  depositor  has  that  amount  of  money  on  deposit  and  that  the  bank  will 
pay  the  check  when  presented.  Unless  the  check  was  charged  to  the  depositor,  he  might  withdraw 
his  funds  and  when  the  certified  check  was  presented  there  would  not  be  sufficient  funds  to  meet  it, 
in  which  case,  the  bank  would  have  to  make  up  the  difference.  It  is  very  poor  policy  for  a  bank 
to  certify  a  check  when  the  depositor  has  not  sufficient  funds  on  deposit,  and  in  some  cases  the 
officials  of  the  bank  will  be  held  criminally  responsible  for  doing  this. 

Checks  are  certified  by  writing  across  the  face,  "Good,  when  properly  endorsed,  per " 

Checks  are  usually  certified  by  the  teller,  but  may  be  certified  by  any  other  official  of  the  bank.  Illus- 
tration No.  84  shows  the  correct  form  of  a  certified  check. 


^/;  /^/ 


Illustration  No.  84.     A  Certified  Check. 

§  209.  Collecting  Notes  and  Drafts.  A  note  or  draft  may  be  made  payable  at  the  office 
of  the  person  in  whose  favor  it  is  made,  or  at  some  bank.  It  is  customary  in  business  to  send  notes 
and  drafts  to  a  bank  for  collection,  as  the  average  business  man  will  meet  an  obligation  at  a  bank 
more  promptly  than  at  the  office  of  the  holder.  If  the  maker  of  a  note  or  drawee  of  a  draft  lives 
in  a  different  city  from  that  of  the  holder,  the  paper  may  be  left  at  the  bank  at  which  the  holder  does 
business,  or  sent  to  a  bank  in  the  city  in  which  the  maker  or  drawee  resides.  As  a  general  rule, 
banks  will  collect  papers  of  this  kind  for  customers  without  charge,  and  many  business  men  use  their 
banks  for  this  purpose.  Better  results  are  obtained  when  the  paper  is  sent  to  some  bank  in  the  city 
where  the  person  who  is  to  pay  it  resides,  and  when  possible,  to  the  bank  at  which  he  does  business. 
This  avoids  a  waste  of  time  and  insures  prompt  attention,  as  the  bank  collecting  the  paper  will  make  a 
charge  for  its  services;  hence,  give  it  more  prompt  attention  than  the  bank  at  which  the  holder  does 
business,  since  they  make  no  charge.  It  is  not  necessary  to  send  a  note  or  draft  to  the  particular 
bank  at  which  it  is  made  payable,  as  the  holder  has  the  right  to  retain  and  collect  it  himself  or 
send  it  to  any  bank  or  collection  agency  that  he  may  designate. 

When  a  note  or  draft  is  sent  to  a  bank  or  collection  agency  for  collection,  it  should  be  endorsed 
to  the  person  or  bank  to  whom  it  is  sent  for  collection,  otherwise  it  might  be  used  as  an  asset  of  the 
person  who  is  to  collect  it.    The  usual  form  of  endorsement  is,  "Pay  to  the  order  of  First  National 


194  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

Bank  for  collection  and  remittance,  C.  W.  Keeland  &  Co."  This  endorsement  indicates  that  the 
paper  belongs  to  C.  W.  Keeland  &  Co.,  and  has  been  sent  to  the  First  National  Bank  for  collection 
and  remittance.  If  the  paper  has  been  made  payable  at  the  bank  where  the  firm  does  business, 
the  word  "Credit"  would  have  to  be  substituted  for  "Remittance."  A  paper  endorsed  in  this  way 
can  not  be  used  by  the  one  to  whom  it  is  sent  for  collection,  but  must  be  collected  or  returned  to  the 
holder.  If  the  words  "For  collection  and  remittance"  are  omitted  and  the  person  to  whom  it  was  sent 
for  collection  wishes  to  use  the  paper  for  his  own  benefit,  he  might  do  so,  as  the  one  to  whom  he  trans- 
ferred it  would  have  no  means  of  knowing  that  it  was  not  his  by  right  of  purchase. 

RULES  FOR  TAKING  A  TRIAL  BALANCE  AND  FOR  DETECTING  ERRORS  WHEN  IT 

DOES  NOT  BALANCE. 

§  210.  The  Student,  as  well  as  the  bookkeeper,  soon  learns  to  dread  the  Trial  Balance,  the 
reason  being  that  it  is  this  which  tests  his  accuracy.  As  a  general  rule,  the  bookkeeper  or  student 
who  begins  with  the  expectation  of  having  trouble  in  getting  his  Trial  Balance  to  balance,  is  sure  not 
to  be  disappointed.  It  requires  confidence  in  one's  ability  to  succeed  in  anything,  and  the  book- 
keeper who  has  confidence  in  his  ability  to  keep  a  set  of  books  and  take  a  Trial  Balance  will  seldom 
have  trouble  in  getting  it  to  balance.  It  requires  only  a  few  moments'  time  to  prove  the  correctness 
of  each'  entry,  posting,  addition  or  subtraction.  The  trouble  with  the  average  student  is  that  he  does 
not  appreciate  the  importance  of  this  and  trusts  too  much  to  luck,  hence  spends  more  time  in  finding 
his  errors  than  he  does  in  recording  the  transactions.  The  old  adage,  "Be  sure  you  are  right,  and 
then  go  ahead,"  is  very  applicable  to  the  work  of  the  bookkeeper,  and  the  student  who  can  realize  the 
importance  of  this  will  never  have  trouble  with  any  of  his  work,  and  especially  the  Trial  Balance. 

Since  many  mistakes  are  made  in  taking  the  Trial  Balance,  a  few  rules  are  given  for  this.  The 
student  should  accustom  himself  to  observe  these,  being  careful  to  follow  them  in  the  order  given. 

^  I.  Verify  the  Correctness  of  each  Entry  Posted,  and  addition  or  subtraction  at  the  time  the 
work  is  done. 

^  2.  After  the  Checking  has  been  Completed,  glance  over  the  books  of  original  entry  and  the  ledger 
tracing  any  posting  that  may  not  be  checked.  If  the  check  marks  are  all  on  the  same  vertical  line 
in  the  books  of  original  entry  and  the  ledger,  it  will  facilitate  detecting  errors. 

^3.  Do  Not  Accept  One  Addition  of  the  sales  book  and  purchases  book,  as  errors  are  very  apt 
to  be  made  here.  If  the  principles  outlined  in  No.  i  have  been  followed,  the  addition  of  each  page 
will  have  been  proved  as  it  is  added.  Unless  each  entry  in  the  journal,  which  affects  more  than  one 
debit  or  credit,  is  proved  by  footing  with  pencil,  it  is  best  to  add  each  page  in  the  journal  and  prove 
that  the  total  debits  equal  the  total  credits. 

^  4.  After  all  the  Postings  have  been  Checked,  the  accounts  in  the  ledger  footed,  and  the  difference 
of  the  personal  accounts  entered,  begin  at  the  beginning  of  the  ledger  and  go  over  all  of  the  work 
again.  Do  not  take  off  the  Trial  Balance  without  doing  this,  as  you  are  very  apt  to  make  errors  in 
the  addition  or  subtraction. 

^  5.  After  the  Accounts  have  been  Transferred  to  the  Trial  Balance,  check  the  amounts  with  the 
ledger.    This  will  avoid  possible  errors  in  entering  the  amounts  from  the  ledger. 

^  6.  Verify  the  Addition  of  Each  Side  of  the  Trial  Balance  as  it  is  added.  If  you  add  the  credit 
side  first,  then  verify  the  addition  of  this  side  before  adding  the  debit  side.  It  might  be  possible 
to  make  a  corresponding  error  in  adding  each  side,  and  thus  have  a  Trial  Balance  which,  on  its  face, 
was  in  balance,  but  in  reality  was  out  of  balance.  This  would  mean  trouble  with  the  next  Trial 
Balance. 

If  the  student  follows  the  above  instructions  in  taking  each  Trial  Balance,  he  will  very  seldom 
have  occasion  to  refer  to  the  following  information  relative  to  detecting  errors  in  it.  If  it  does  not 
balance,  and  all  of  the  rules  outlined  above  have  been  applied,  note  the  following: 

Tl  7.     Ascertain  the  Amount  of  the  Error,  then  look  over  tlie  Trial  Balance,  ledger  and  books  of 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  195 

original  entry  to  see  that  there  is  an  amount  equal  to  this,  or  one-half  of  it.  If  there  is  an  amount 
equal  to  the  error,  check  the  posting  to  see  that  it  is  correct.  If  an  amount  is  half  of  the  error,  and 
posted  to  the  wrong  side  of  an  account,  it  will  make  the  same  difference  as  the  amount  of  the  error. 

^8.  If  the  Amount  of  the  Error  is  Divisible  hy  p,  it  is  possible  that  the  error  is  caused  by  trans- 
posed figures.  Unless  the  error  is  divisible  by  9,  it  could  not  be  caused  by  a  transposition.  If  the 
student  does  not  understand  how  the  transposed  figures  affect  the  Trial  Balance,  he  will  note  the 
following : 

Any  number  composed  of  two  figures,  the  difference  of  which  is  the  same  as  the  result  of  divid- 
ing the  error  by  9,  when  transposed  will  give  the  amount  of  the  error. 

Example:  Suppose  the  Trial  Balance  is  out  45c;  divide  this  by  9,  and  the  result  is  5.  Any  number 
composed  of  two  figures,  the  difference  of  which  is  5,  when  transposed  will  cause  an  error  of  45c; 
the  difference  between  o  and  5  is  5.  05  posted  as  50  makes  an  error  of  45c;  the  difference  between 
I  and  6  is  5;  16  posted  as  61  makes  an  error  of  45c,  or  61  posted  as  16  makes  the  same  error.  In 
the  same  way  27,  38,  49,  50,  61,  72,  83  or  94,  when  transposed  will  make  an  error  of  45c;  thus 
to  find  this  error  of  45c,  you  will  trace  the  posting  of  any  of  these  amounts  and  see  that  they  have 
not  been  transposed.     The  same  principle  applies  with  any  other  error  divisible  by  9. 

^9.  Again  Check  the  Additions  and  Subtractions  in  the  ledger.  Inspect  each  account  that  has 
been  ruled  and  assure  yourself  that  it  balances.  Many  times  in  ruling,  the  bookkeeper  will  make 
a  mistake  and  include  above  the  ruling  some  amount  that  does  not  balance.  See  that  pencil  footings 
which  include  amounts  above  and  below  the  ruling,  have  been  erased.  It  often  happens  that  an 
account  has  been  footed  to  take  a  Trial  Balance,  and  during  the  succeeding  month  some  payment 
is  made  that  balances  the  account  at  a  point  above  the  pencil  figures;  unless  these  pencil  figures 
are  erased  at  the  time  the  account  is  ruled,  they  are  apt  to  be  used  in  taking  the  next  Trial  Balance. 

^10.  Check  the  Amounts  Entered  on  the  Trial  Balance  with  the  ledger  accounts.  Always  use 
check  marks  to  indicate  checking,  as  there  is  little  use  in  checking  unless  this  is  done. 

^11.  Verify  the  Total  of  the  Sales  Book,  purchases  book,  and  debit  and  credit  columns  of  the 
journal. 

^12.  Unless  the  Pass  Book  has  been  written  up  by  the  bank,  and  the  balance  verified  with  the 
cash  balance  and  balance  shown  on  the  check  stub,  verify  your  cash  balance.  The  fact  that  the 
cash  proves  is  not  absolute  evidence  that  there  is  not  an  error.  This  is  especially  true,  if  your  Trial 
Balance  is  off  one  cent,  ten  cents,  one  dollar,  ten  dollars,  one  hundred  dollars,  etc. 

^  13.  Check  all  the  Postings  again  and  indicate  this  by  check  marks  on  a  different  vertical  line 
from  that  used  with  the  previous  checkings. 

The  above  instructions  are  given  in  the  order  of  their  importance  and  should  be  followed  in 
regular  order.  The  error  may  be  discovered  before  it  is  necessary  to  use  all  of  them.  The  average 
student  is  apt  to  become  discouraged  before  he  has  followed  each  one  of  these  instructions  and  wishes 
to  appeal  to  the  teacher  for  assistance.  If  he  can  but  reaHze  that  the  error  is  in  his  work  and  should 
be  discovered  by  him,  he  will  exhaust  every  effort  to  locate  it  before  asking  for  assistance  from  the 
teacher. 

If  an  adding  machine  is  used  in  connection  with  the  school  work,  it  is  suggested  that  the  stu- 
dent be  permitted  to  use  this  in  checking  his  work.  However,  he  should  not  be  allowed  to  depend 
upon  the  adding  machine  for  the  accuracy  of  his  results.  No  matter  how  many  adding  machines 
may  be  used  in  an  office,  it  is  necessary  for  the  bookkeeper  to  know  how  to  add  and  be  skilled  in 
this,  and  the  student  can  not  get  too  much  practice  in  work  of  this  kind  in  the  schoolroom.  The 
use  of  the  adding  machine  is  left  to  the  discretion  of  the  teacher,  But  he  should  never  permit  its 
use  by  a  student  who  is  inaccurate  in  adding. 

To  the  Student.  Do  not  "Stuff"  a  Trial  Balance.  This  is  as  foolish  as  stealing  money, 
for  you  are  just  as  sure  to  get  caught.  No  one  ever  lost  anything  in  being  honest,  and  this  is  one 
of  the  most  dishonest  things  of  which  the  bookkeeper  can  be  guilty. 


196  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

§  211.  How  to  Correct  Errors.  The  place  and  nature  of  an  error  largely  determines  the  method 
of  correction.  Errors  in  books  of  original  entry  are  corrected  in  an  entirely  different  manner  from 
those  in  books  of  complete  entry,  or  errors  in  business  papers.  For  reference  the  following  informa- 
tion is  given: 

^  I.  Errors  in  Books  of  Original  Entry.  When  the  correction  is  to  be  made  on  a  book  of  original 
entry,  an  eraser  should  not  be  used.  In  case  it  is  necessary  to  use  the  book  as  evidence  in  litiga- 
tion, the  bookkeeper  might  have  some  trouble  in  convincing  the  jury  that  the  entries  are  legal.  The 
best  method  of  correcting  an  error  in  a  book  of  original  entry  is  to  draw  a  single  red  line  through 
the  amount  only  and  write  the  correct  amount  above  it.  If  an  entire  entry  is  wrong,  draw  red  lines 
through  all  the  amounts,  placing  a  check  mark  in  the  folio  column  at  the  left  and  make  the  cor- 
rect entry.  Never  draw  red  lines  through  the  name  of  an  account  or  explanation,  as  this  is  not  nec- 
essary, and  certainly  does  not  add  to  the  appearance  of  the  books. 

^  2.  Errors  in  the  Ledger,  or  Book  of  Complete  Entry.  Entries  in  this  book  are  recorded 
in  the  book  of  original  entry,  hence  the  correctness  of  an  amount  written  over  an  erasure  can  be 
verified.  For  this  reason  errors  in  the  ledger  may  be  erased.  A  knife  makes  the  best  eraser  and  should 
be  used  in  preference  to  one  made  of  rubber.  If  the  error  is  discovered  before  the  ink  is  dry,  blot 
it  before  erasing,  otherwise  the  result  will  be  a  blur.  If  the  nature  of  an  error  is  such  that  it  is  best 
to  make  a  journal  entry  correcting  it,  this  may  be  done,  in  which  case  full  explanation  should  be 
given,  so  that  the  auditor  will  understand  the  entry.  If  an  error  has  been  made  in  the  book  of 
original  entry  and  is  not  discovered  until  after  it  has  been  posted,  it  must  be  corrected  in  both  the 
ledger  and  book  of  original  entry.  The  auditor  will  verify  the  original  entry  with  that  in  the  ledger 
and  the  bookkeeper  must  see  that  the  amounts  are  the  same. 

T[  3.  Correcting  Errors  in  Business  Papers.  When  an  error  is  made  in  making  out  a  business 
paper,  the  best  way  to  correct  it  is  to  destroy  the  paper  and  make  a  new  one.  No  business  forms 
should  be  allowed  to  go  out  unless  they  are  absolutely  correct,  both  in  regard  to  form  and  amount. 
While  the  correction  of  an  error  might  be  permitted  in  invoices,  account  of  sales,  shipping  invoices, 
etc.,  they  should  never  be  permitted  in  a  paper  which  involves  a  contract.  This  refers  to  checks, 
notes,  receipts,  etc.  All  of  these  are  subject  to  disputes,  and  it  may  be  necessary  to  use  the  original 
paper  as  evidence  in  litigation,  in  which  case  errors  will  always  strengthen  the  case  of  the  plaintiff. 

§  212.  Exchange.  Exchange  (§  100,  ^2)  is  a  check  or  sight  draft  drawn  by  one  bank  upon 
another  bank  situated  in  some  other  city.  It  is  really  a  check  drawn  by  a  bank  on  another  bank  with 
which  it  has  money  deposited.  Exchange  takes  its  name  from  that  of  the  city  in  which  the  bank  that 
is  to  pay  the  check  or  draft  is  situated.  Those  payable  by  a  bank  in  New  York  City  are  termed 
"New  York  Exchange;"  those  payable  by  a  bank  in  Chicago,  "Chicago  Exchange;"  those  pay- 
able by  a  bank  in  New  Orleans,  "New  Orleans  Exchange,"  etc.  When  a  bank  on  which  the  check 
or  draft  is  drawn  is  in  the  same  country  it  is  designated  as  "Domestic  Exchange;"  when  it  is  in  a 
different  country,  "Foreign  Exchange."  Domestic  Exchange  is  represented  by  only  one  draft;  For- 
eign Exchange  is  usually  represented  by  three  drafts,  each  being  sent  by  a  separate  route,  the  one 
being  received  first  being  honored  and  the  others  destroyed. 

The  custom  of  issuing  exchange  originated  in  New  York  City.  This  city  is  the  recognized  com- 
mercial center  of  the  United  States,  and  consequently  every  city  and  town  throughout  the  United 
States  is  more  or  less  dependent  upon  New  York  City  for  supplies.  There  are  no  cities,  and  very  few 
towns,  in  the  United  States  in  which  the  merchants  do  not  purchase  more  or  less  goods  from  New 
York  City.  The  merchants  who  buy  these  goods  must  pay  for  them.  This  was  formerly  done  by 
sending  a  check  payable  on  their  local  bank.  These  checks  were  deposited  in  the  various  banks  in 
New  York  City  by  the  merchants  or  manufacturers  who  received  them.  It  can  be  easily  seen  that 
this  worked  a  great  hardship  on  the  banks  of  New  York,  as  they  were  compelled  to  do  without  the 
use  of  their  money  while  these  checks,  payable  at  banks  in  all  parts  of  the  United  States,  were  being 
collected,  since  the  merchant  or  manufacturer  who  deposited  the  check  regarded  it  as  cash.  If  the 
merchants  and  manufacturers  in  New  York  City  had  purchased  commodities  from  different  parts 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  197 


of  the  United  States  for  the  same  amount,  as  the  merchants  in  the  various  parts  were  purchasing  from 
New  York,  the  New  York  merchants  could  very  easily  have  effected  settlement  with  the  other  banks ; 
but  since  this  is  not  the  case,  they  were  compelled  to  wait  until  the  checks  could  be  sent  to  the  banks 
on  which  they  were  drawn  and  money  in  payment  for  same  returned  by  express.  To  avoid  having 
to  carry  so  much  paper  for  which  they  were  receiving  no  compensation,  the  banks  in  New  York  City 
entered  into  an  agreement  that  they  would  not  accept,  as  cash,  any  check  payable  at  a  bank  situated 
outside  of  the  city,  and  should  checks  of  this  description  be  presented  for  deposit,  they  would  charge 
a  small  amount  for  collecting  the  same,  this  amount  being  sufficient  to  cover  the  expense  of  collect- 
ing and  interest  on  the  money  until  it  was  collected.  This  in  turn  worked  a  great  hardship  on  the 
merchants  and  manufacturers  in  New  York  City,  they  being  compelled  to  pay  collection  charges 
on  all  checks  received  from  their  customers.  That  the  amount  paid  for  collection  charges  might  be 
distributed,  the  bankers  in  New  York  City  suggested  that  the  various  banks  situated  throughout 
the  country  keep  on  deposit  amounts  on  which  they  could  issue  checks  in  exchange  for  those  of  their 
customers;  thus,  if  a  merchant  in  Omaha,  Nebraska,  wishes  to  remit  to  a  firm  in  New  York  City, 
instead  of  sending  his  check,  he  would  take  it  to  his  bank  and  exchange  it  for  a  check  payable  on  some 
bank  in  New  York  City.  When  this  check  is  received  by  the  firm  to  whom  it  is  sent,  it  is  deposited 
in  the  bank  without  charges,  as  it  is  payable  in  the  city.  Should  the  bank  in  Omaha  charge  for  issu- 
ing the  exchange  (Check  on  New  York),  it  would  be  only  a  small  amount,  hence  scarcely  felt  by  the 
merchant  who  paid  it,  while  to  the  firm  in  New  York  which  is  receiving  hundreds  of  checks  from  busi- 
ness men  throughout  the  United  States,  the  payment  of  collection  charges  would  mean  a  very  heavy 
expense.  Some  banks  do  not  charge  their  customers  for  issuing  exchange,  but  as  a  general  rule  a 
charge  of  about  one-eighth  of  one  per  cent  is  made.  This  system  worked  out  by  the  New  York  banks 
has  been  adopted  by  the  banks  in  all  large  cities,  and  has  proved  very  beneficial  to  the  banks  and 
merchants  in  those  cities. 

The  person  who  keeps  no  regular  bank  account  and  wishes  to  send  money  to  a  distance  can  take 
his  money  to  any  bank  and  exchange  it  for  a  check  payable  on  a  bank  in  the  city  to  which  his  re- 
mittance is  to  be  sent.  If  the  remittance  is  to  be  sent  to  a  small  town,  the  exchange  would 
be  made  payable  on  a  bank  in  one  of  the  large  cities  near  this.  Checks  or  drafts  drawn  on  New  York 
banks  are  always  acceptable,  because  practically  every  bank  in  the  United  States  keeps  an  account 
with  some  bank  in  New  York  City,  hence  is  always  willing  to  receive  any  paper  that  will  permit  them 
to  send  funds  to  New  York  City  without  expense.  There  are  other  reasons  why  the  banks  in  smaller 
cities  keep  money  on  deposit  in  the  banks  in  the  larger  cities,  which  will  be  explained  in  the  sub- 
ject of  Banking. 

RESERVE  FOR  BAD  DEBTS  ACCOUNT. 

§  213.  The  Object  of  this  Account  is  to  show  the  reserve  set  aside  for  a  possible  loss  on  ac- 
count of  bad  debts,  and  the  amount  of  bad  debts  charged  off.  Any  person  or  firm  that  extends  credit 
must  expect  to  lose  some  of  the  amounts  charged  to  customers.  No  matter  how  careful  the  credit 
man  may  be  in  extending  credit,  he  is  almost  sure  to  permit  some  one  to  purchase  property  on  time 
who  will  fail  to  make  payment.  Since  the  bookkeeper  can  not  know  the  account  or  accounts  that  will 
prove  worthless,  it  is  necessary  to  carry  a  negative  account  (§  19)  to  show  the  estimated  amount  that 
will  not  be  collected.  Usually  a  certain  per  cent  of  the  amount  due  from  customers  (Accounts  Receiv- 
able) is  considered  uncollectible,  and  at  the  end  of  the  fiscal  period  the  Reserve  for  Bad  Debts  account 
is  credited  with  this,  and  the  Profit  and  Loss,  or  Surplus  account  debited.  The  use  of  this  account 
permits  the  losses,  on  accounts  created  during  each  fiscal  period,  to  be  shown  in  that  period. 

Debit  Reserve  for  Bad  Debts  Account:  Credit  Reserve  for  Bad  Debts  Account: 

t  I.     With   the  amount  due  from  a  customer  ^2.     At  the  end  of  each  fiscal  period  for  that 

that  can  not  be  collected,  the  entry  being  per  cent  of  the  accounts  receivable  that 

made  at  the  time  the  owners  decide  the  the    owners    have    decided    will    not    be 

account  is  worthless.  collected. 


198 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^  3.  This  being  a  Negative  Account  (§  19),  the  balance  is  not  considered  by  itself,  but  in  connec- 
tion with  the  account  which  it  represents.  It  is  used  in  making  the  Financial  statement,  being  deducted 
from  the  amount  due  from  customers  (Accounts  Receivable).  The  credit  side  should  always  be 
the  larger.  If  at  any  time  the  debit  side  is  the  larger,  an  entry  should  be  made  for  an  additional  per 
cent,  because  it  is  evident  that  the  estimated  per  cent  has  not  been  sufficient  to  cover  the  loss  on 
worthless  accounts. 

^  4.  To  Close  the  Reserve  for  Bad  Debts  Account.  This  account  is  not  closed  unless  it  is  desired 
to  transfer  the  balance  to  a  new  page  or  bring  it  down  on  the  same  page.  The  difference  is  entered 
in  red  ink,  the  account  ruled  with  single  and  double  red  lines,  and  the  footings  entered  in  black  ink. 
If  the  balance  is  transferred  to  a  new  page  this  page  should  be  shown  in  the  red  ink  entry;  if  it  is 
brought  down  on  the  same  page,  check  marks  are  placed  in  the  L.  F.  column  in  each  place. 

NOTE. — Some  accountants  do  not  use  this'account,  but  charge  each  worthless  account  to  the  Profit  and  Loss,  or 
Surplus  account  at  the  time  it  is  deemed  worthless.  However,  it  is  best  practice  to  keep  the  account,  because  it  permits 
each  fiscal  period  to  show  the  actual  loss  on  worthless  accounts  created  in  that  period. 

§  214.  Admitting  a  Partner.  -When  a  partner  is  admitted  to  a  going  concern  (one  actively 
engaged  in  business),  it  is  usually  necessary  to  close  the  books  and  ascertain  the  present  value  of  the 
business.  By  special  agreement  with  the  incoming  partner  this  might  be  omitted,  but  it  is  not  the 
best  policy,  as  the  new  partner  should  know  the  present  condition  of  the  business.  The  value  of 
the  fixed  investments,  accounts  due  the  business,  notes  due  the  business,  merchandise  in  stock,  and 
other  property  must  be  agreed  upon  by  the  present  owners  and  the  partner  who  is  to  be  admitted. 
The  bookkeeper  makes  his  entries  and  statements  from  these  facts,  but  has  nothing  to  do  with  ob- 
taining them. 

At  the  close  of  May,  the  firm  of  C.  W.  Keeland  &  Co.  have  agreed  to  admit  Chas.  A.  Howell 
as  an  equal  partner  in  the  business.  The  facts  concerning  the  present  value  of  the  property  be- 
longing to  the  business  are  supplied  to  the  bookkeeper,  and  it  is  his  duty  to  make  the  proper  jour- 
nal entries  for  depreciation,  insurance,  etc.,  take  a  Trial  Balance,  make  the  Financial,  Trading,  and 
Profit  and  Loss  statements  and  close  the  ledger.  No  detailed  information  is  given  relative  to  the 
statements  required  at  this  time,  as  these  have  been  fully  explained  and  illustrated  in  the  preceding 
work,  and  the  student  is  referred  to  that  information. 


QUESTIONS. 


9- 
10. 
II. 
12. 
13- 

14. 

15- 
16. 


Define  a  Credit   Bill.      (§  205.)  17. 

Define   a    Bill   of   Lading.      (§  206.) 

Why   are   they   made   in    triplicate?  18. 

How  are  three  copies  made  at    once. 

What  is  the   Interstate  Commerce  Com- 
mission? •  19. 

For  what  is  a  credit  bill  rendered?  20. 

Why    are   credit    bills    usually    printed    a  21. 

different  color  from   the  regular  bills? 

Define  a  Telegram.     (§  207.)  22. 

Why  are  telegrams  used? 

How  do  telegraph  companies  make  money?  23. 

Name    the    two    principal    companies. 

Define  a  regular  message.  24. 

On  what  number  of  words  are  the  charges  25. 

based?  26. 

Define  a  day  letter.  27. 

On  what  are  the  charges  based?  28. 

Define  a  night  letter. 


On  what  number  of  words  are  the  charges 

based? 
Define   a   certified   check  and   give   three 

conditions    under    which    it    would    be 

best  to  have  a  check  certified.   (§  208.) 
Who  has  the  check  certified? 
By  whom  is  it  certified? 
Describe    the   best    method    of    collecting 

notes  and  drafts.     (§  209.) 
How    are    errors    corrected    in    books    ot 

original  entry?     (§211,  1[  i.) 
How    are    errors    corrected    in    books    of 

complete  entry?     (§211,   ^2.) 
Define  Exchange.     (§  212.) 
Give  its  origin. 

Name  some  of  the  advantages. 
Define  the  Reserve  for  Bad  Debts  account. 
Why  is  it  best  to  close  the  books  when 

admitting  a  new  partner  (§  214.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  199 


EXERCISES  IN  JOURNAL  ENTRIES  AND  STATEMENTS. 

EXERCISE  No.  67.  i.  July  27th.  We  owe  Allen  &  Davis  $907.63,  which  is  for  an  invoice 
purchased  July  20th,  terms,  3/10 — n/30.  We  checked  the  goods  when  they  were  received  and  found 
a  shortage  amounting  to  $38.49.  We  sent  them  a  check  for  the  amount  due.  Make  the  required 
cash  book  entry.  The  amount  due  them  is  the  face  of  the  invoice,  less  the  amount  of  shortage  and 
discount. 

2.  April  5.  Allison  &  Foust  owe  Monroe  &  Flenniken  $585.25,  which  is  for  an  invoice  pur- 
chased March  6th,  terms,  3/30 — n/60.  They  settle  this  by  transferring  a  note  signed  by  L.  C. 
Jordan  for  $426.41,  dated  February  5th,  and  due  in  sixty  days,  and  their  check  for  the  balance.  Mon- 
roe &  Flenniken  allow  the  discount,  but  deduct  interest  at  6%  for  the  remaining  time  of  the  note. 
Make  the  required  journal  entry  for  Allison  &  Foust.  In  calculating  the  interest,  use  twenty-eight 
days  in  February. 

3.  January  ist.  L.  B.  Audigier,  M.  B.  Griffin  and  C.  B.  Carter  form  a  partnership  for  the 
purpose  of  engaging  in  the  real  estate  business.  Each  partner  is  to  receive  interest  on  the  amount 
invested  and  be  charged  with  interest  on  amounts  withdrawn.  At  the  end  of  the  year  the  profit  is 
to  be  shared  in  proportion  to  the  net  investment  of  each  partner.  January  ist,  each  invests 
$3,000.00.  January  28th,  Audigier  withdraws  $500.00;  February  6th,  Griffin  invests  $1,200.00;  Feb- 
ruary 24th,  Carter  invests  $1,500.00;  March  ist,  Audigier  invests  $2,500.00;  March  8th,  Griffin  with- 
drew $1,500.00;  March  12th,  Carter  withdrew  $1,265.28;  March  i6th,  Griffin  invests  $1,582.75;  March 
31st,  Audigier  withdrew  $827.40;  April  15th,  the  firm  accepts  real  estate  belonging  to  Audigier  valued 
at  $1,182.65;  April  22d,  Griffin  withdrew  $365.40;  April  30th,  Carter  withdrew  $809.11;  June  ist, 
Griffin  invests  $1,122.60;  June  27th,  Carter  invests  $2,265.91;  July  ist,  Audigier  withdrew  $500.00; 
August  1st,  Griffin  withdrew  $1,342.86;  August  i6th,  Audigier  invests  $1,598.76;  August  21st,  Grif- 
fin invests  $1,800.00;  September  ist,  Carter  invests  $2,500.00;  September  29th,  Carter  withdrew 
$1,500.00;  October  5th,  Griffin  withdrew  $850.00;  October  31st,  Audigier  withdrew  $1,000.00;  No- 
vember 5th,  Griffin  invests  $1,200.00;  November  9th,  Carter  invests  $1,000.00;  November  22d,  Audi- 
gier invests  $1,250.00;  December  ist.  Carter  withdrew  $250.00.  At  the  close  of  the  fiscal  period, 
December  31st,  the  Financial,  and  Profit  and  Loss  statements  show  a  gain  of  $5,627.82.  Open  an 
account  with  each  partner;  give  him  credit  for  each  investment  and  interest  on  the  same,  and  charge 
him  with  each  withdrawal  and  interest  on  the  same.  Interest  is  calculated  from  the  date  of  the  en- 
try to  the  close  of  the  year;  rate  6%.  Use  actual  number  of  days  in  interest  calculations  (Use 
28  days  in  February),  except  when  the  time  is  one  year  or  more.  Open  an  account  with  Interest 
and  debit  and  credit  this  as  the  partners  are  credited  and  debited.  When  the  final  results  have  been 
obtained,  deduct  the  net  amount  of  interest  from  the  profit,  and  give  each  partner  credit  for  his 
proportionate  part  of  this  as  per  agreement.     Close  the  Partners'  Capital  Accounts. 

4.  September  I9th.^|j.  B.  Monday  owes  Robertson  &  Owens  $2,567.85,  which  is  for  an  invoice 
purchased  September  loth,  terms  3/10 — n/6o.  He  settles  this  as  follows:  A  note  which  he  holds 
against  Robertson  &  Owens,  which  is  due  today  without  interest,  for  $526.49,  a  check  for  $500.00, 
and  his  30-day  note  for  such  an  amount  that,  when  discounted,  the  net  proceeds  will  pay  the  bal- 
ance due  on  this  bill,  less  discount.     Make  the  required  entries  for  each. 

5.  January  22d.  A.  R.  Morrow  owes  Jennings  Bros.  $36,265.  which  is  for  an  invoice  purchased 
December  23d,  terms,  3/30 — n/60.  C.  H.  Adkins  owes  A.  R,  Morrow  an  account  that  is  due,  the 
amount  of  which  is  more  than  the  amount  due  Jennings  Bros.  Adkins  agrees  to  accept  a  three-day 
draft  for  the  amount,  not  to  exceed  $360.00,  and  Jennings  Bros,  agree  to  allow  credit  for  the  draft 
accepted  by  Adkins.  The  bookkeeper  for  Mr.  Morrow  draws  a  draft  on  Adkins  for  the  amount 
due  Jennings  Bros.,  less  discount,  and  sends  it  to  Jennings  Bros,  for  credit.  Make  the  journal 
entry  that  each  party  would  make  on  his  books,  assuming  that  Adkins  accepts  the  draft  when  pre- 
sented. 


200  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

6.  May  12th.  We  owe  the  National  Biscuit  Co.  $1,386.45,  which  is  for  an  invoice  purchased 
May  3d,  terms,  4/10 — n/30.  We  pay  them  $500.00  on  account  and  they  allow  us  the  discount.  Make 
the  required  cash  book  entry. 

7.  June  6th.  Darling  Bros,  owe  D.  A.  Miller  $352.65,  which  is  for  an  invoice  purchased  May 
loth,  terms,  3/30 — n/60.  S.  T.  Hines  owes  Darling  Bros.,  and  agrees  to  accept  a  ten-day  draft 
for  $200.00,  to  apply  on  account.  D.  A.  Miller  agrees  to  allow  them  credit  for  this  draft  if  ac- 
cepted by  Hines,  also  to  allow  discount.  Make  the  required  entry  that  each  party  would  make 
on  his  books,  assuming  that  Hines  accepts  the  draft  when  it  is  presented. 

8.  January  1st.  James  Donaldson,  W.  H.  Peck,  and  R.  C.  Anderson  form  a  partnership  for 
the  purpose  of  engaging  in  the  retail  grocery  business.  Mr.  Donaldson  invests  cash,  $2,500.00;  a 
note  for  $650.00,  due  in  four  months,  with  interest  from  date;  an  account  due  him  from  D.  C.  Mul- 
ler  for  $256.27.  W.  H.  Peck  invests  cash,  $1,500.00;  real  estate,  $2,000.00;  the  firm  assumes  a  mort- 
gage of  $1,000.00,  which  is  dated  July  ist  of  the  preceding  year,  with  interest  at  5%;  a  team  of  horses 
and  wagon,  valued  at  $500.00;  five  shares  of  City  National  Bank  stock,  valued  at  $127.50  a  share. 
R.  C.  Anderson  invests  his  present  stock  of  goods,  which  is  invoiced  at  $1,626.95;  cash,  $500.00;  per- 
sonal accounts  due  him,  $689.47,  ^ess  5%  reserve  for  bad  debts;  notes  due  him  for  $427.56,  less  5% 
depreciation;  furniture  and  fixtures,  cost  value,  $750.00,  less  5%  for  depreciation;  he  owes  a  note 
at  the  City  National  Bank  for  $500.00,  which  the  new  firm  agrees  to  pay. 

Make  the  required  opening  entries.  Where  depreciation  is  considered,  it  is  necessary  to  let 
the  account  representing  the  property  invested  show  the  full  value,  and  the  reserve  for  depreciation 
account  show  the  amount  of  the  depreciation.  In  estimating  the  value  of  the  partners'  investments, 
the  depreciation  reserve  must  be  deducted. 

9.  Johnson  &  Crim  owe  Chas.  Adair  $147.85,  which  is  due.  A.  V.  Daws  owes  them  $126.40. 
They  draw  at  thirty  days'  sight  on  Daws  in  favor  of  Adair  for  $126.40,  and  send  the  draft  to  Adair 
for  credit.     Adair  accepts  the  draft.     Make  the  entry  each  party  would  make  on  his  books. 

10.  Exchanged  a  horse  named  Bill  (cost  price,  $200.00),  for  a  horse  named  Sam,  valued  at 
$150.00,  and  received  $25.00  difference  in  cash.     Make  the  required  entry. 

11.  E.  R.  Brown  and  C.  W.  Simpson  are  partners  in  the  retail  clothing  business.  At  the  end 
of  the  fiscal  period,  July  ist,  their  bookkeeper  makes  the  Financial,  Trading,  and  Profit  and  Loss 
statements.  After  all  of  the  entries  have  been  made  at  the  close  of  the  period,  the  Trial  Balance 
shows  the  following: 

E.  R.  Brown,  Capital,  Dr.  $1,000.00,  Cr.  $3,500.00;  C.  W.  Simpson,  Capital,  Dr.  $1,000.00, 
Cr.  $3,500.00;  E.  R.  Brown,  Personal,  Dr.  $387.65;  C.  W.  Simpson,  Personal,  Dr.  $639.87;  Inven- 
tory, Dr.  $3,621.92;  Freight  In,  Dr.  $1,129.63,  Cr.  $26.40;  Purchases,  Dr.  $6,894.43,  Cr.  $391.84; 
Sales,  Dr.  $365.32,  Cr.  $10,862.13;  General  Administrative  Expense,  Dr.  $942.21,  Cr.  $52.35;  Sell- 
ing Expense,  Dr.  $414.95;  Notes  Receivable,  Dr.  $1,010.24;  Interest,  Dr.  $17.95,  Cr.  $80.04;  Fur- 
niture and  Fixtures,  Dr.  $850.50;  Reserve  for  Depreciation  of  Furniture  and  Fixtures,  Cr.  $61.95; 
Notes  Payable,  Cr.  $2,500.00;  Delivery  Equipment,  Dr.  $350.00;  Reserve  for  Depreciation  of  De- 
livery Equipment,  Cr.  $75.00;  Personal  Accounts  Receivable,  Dr.  $4,168.43;  Personal  Accounts 
Payable,  Cr.  $3,785.16;  Sales  Discount,  Dr.  $624.98,  Cr.  $35.50;  Purchases  Discount,  Dr.  $20.00, 
Cr.  $391.64;  Insurance,  Dr.  $125.00;  Cash,  Dr.  $1,791.65;  Sundry  Resource  Inventories,  Dr.  $67.28; 
Sundry  Liability  Inventories,  Cr.  $150.00.  Salable  merchandise  on  hand  as  per  inventory  at  the 
close  of  the  fiscal  period,  $3,618.92. 

Make  the  Financial,  Trading,  and  Profit  and  Loss  statements  and  the  journal  entries  required 
to  close  the  accounts  affecting  the  Trading  statement  into  the  Trading  account,  and  the  accounts 
affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account.  Each  partner  is  to  receive 
one-half  of  the  net  profit. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  201 


12.  At  the  close  of  the  fiscal  period,  extending  from  January  ist  to  July  ist,  the  following  is 
the  condition  of  the  accounts  on  the  ledger  that  are  affected  by  the  journal  entries  required  at  the 
close  of  the  fiscal  period. 

General  Administrative  Expense,  Dr.  $972.65;  Selling  Expense,  Dr.  $527.36;  Insurance,  Dr. 
$362.50;  Store  Fixtures,  Dr.,  $365.90;  Delivery  Equipment,  Dr.,  $450.00;  Interest,  Dr.,  $65.27,  Cr., 
$215.40;  Accounts  Receivable,  Dr.,  $3,692.65.  5%  of  the  value  of  store  fixtures,  and  10%  of 
the  delivery  equipment  is  to  be  set  aside  for  reserve  for  depreciation.  3%  of  the  amount  due  from 
customers  is  to  be  set  aside  as  a  reserve  for  bad  debts.  There  is  $27.65  interest  due  the 
business  on  outstanding  notes,  and  the  business  owes  $65.50  interest  on  notes  payable.  One- 
half  of  the  amount  paid  for  insurance  is  to  be  charged  to  General  Administrative  Expense,  this 
being  the  amount  used  during  the  fiscal  period  of  one-half  year.  The  rent  for  June,  $65.00,  remains 
unpaid.  There  are  stamps  and  stationery  on  hand  valued  at  $46.80.  Johnson  Bros,  owe  the  busi- 
ness $46.50  for  delivery  services  rendered  during  the  month.  A  livery  bill  of  $42.50,  for  board  of 
horses   for  June,   is  not  paid.     (§  199,  ^^  i — 3.) 

Make  the  required  journal  entries. 

13.  August  7th.  H.  C.  Jordan  owes  the  Brown  Mfg.  Co.  a  note  for  $2,500.00,  which  was  dated 
May  15th,  and  due  in  four  months  with  interest  from  date.  The  Brown  Mfg.  Co.  owes  him  a  note 
for  $1,200.00,  dated  June  8th,  and  due  in  sixty  days  with  interest  from  date.  As  the  Brown  Mfg. 
Co.'s  note  is  due  today,  Mr.  Jordan  wishes  to  settle  his  note  at  the  same  time,  and  the  Brown  Mfg. 
Co.  has  agreed  to  accept  the  following  settlement:  Their  own  note  which  is  due  today;  a  note  made 
payable  to  Mr.  Jordan  for  $612.60,  dated  May  7th,  and  due  in  six  months  with  interest  at  6%  from 
date;  Mr.  Jordan's  note  for  $500.00,  due  in  sixty  days  with  interest  from  date;  his  check  for  the  bal- 
ance. 

Make  the  required  journal  entries  that  each  of  these  parties  would  make  on  his  books,  assum- 
ing that  the  note  which  Mr.  Jordan  transfers  is  represented  by  the  Notes  Receivable  account  on 
his  books. 

14.  October  ist.  At  the  close  of  the  fiscal  period  the  bookkeeper  for  R.  G.  Mathews  makes 
the  Financial,  Profit  and  Loss,  and  Trading  statements  from  the  facts  shown  on  his  trial  balance. 
The  following  accounts  are  used  in  making  the  Trading  statement: 

Inventory,  Dr.  $4,218.65;  Freight  In,  Dr.  $817.62,  Cr.  $36.80;  Purchases,  Dr.  $6,614.35,  Cr. 
$326.14;  Sales,  Dr.  $218.45,  Cr.  $10,962.71;  Purchases  Discount,  Dr.  $13.50,  Cr.  $286.27;  Sales 
Discount,  Dr.  $419.85,  Cr.  $15.00.  The  present  value  of  salable  merchandise  on  hand  as  per  inven- 
tory taken  at  the  close  of  the  fiscal  period  is  $3,842.96. 

Make  the  Trading  statement,  and  the  journal  entries  required  to  close  the  accounts  afifecting 
this  statement  into  the  Trading  account,  and  the  balance  of  that  account  into  the  Profit  and  Loss 
account. 

15.  The  accounts  affecting  the  Profit  and  Loss  account  at  the  close  of  the  fiscal  period  are 
as  follows: 

Trading  account,  Cr.  $976.42;  General  Administrative  Expense,  Dr.  $516.97;  Commission, 
Dr.  $56.42;  Interest,  Cr.  $37.65^;  Real  Estate  Expense  and  Revenue,  Cr.  $218.40;  Delivery  Ex- 
pense,  Dr.  $227.56. 

Make  the  required  Profit  and  Loss  statement.  The  profit  or  loss  is  shared  equally  by  R.  A. 
Steele  and  C.  W.  Stephenson.  After  completing  the  statement,  make  the  required  journal  entry  to 
close  the  accounts  affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account,  and  close 
each  partner's  share  of  the  net  profit  or  loss  into  his  Capital  account. 


202  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


JUNE. 

A  continuation  of  the  April  and  May  business  introducing  the  following:  Admitting  a  Part- 
ner; new  form  of  Cash  Book;  Accounts  with  Traveling  Expense;  Consignments;  Accounts  with  Con- 
signments and  Shipments;  Account  Sales;  Shipping  Invoices;  Commission  Account;  C.  O.  D. 
Shipments. 

§  215.  Cash  Book.  By  referring  to  illustrations  Nos,  86  and  87,  the  student  will  note  that 
the  cash  book  to  be  used  in  June  is  ruled  with  the  same  number  of  money  columns  on  each  side. 
The  difference  between  the  two  forms  is  in  the  method  of  recording  the  transactions.  This  cash 
book  overcomes  the  objections  to  that  used  in  April  and  May,  as  explained  in  §  180,  Note.  The  net 
amount  of  cash  received  is  entered  in  the  third  column  on  the  debit  side  and  the  net  amount  paid 
in  the  third  column  on  the  credit  side,  thus  the  totals  of  these  two  columns  show  the  amount  of  cash 
received  and  paid,  and  the  difference  is  the  cash  balance. 

^  I.  Debit  Side.  As  explained  in  §  114,  ^  i,  all  cash  received  is  entered  on  the  debit  side  of 
cash  book.  The  total  amount  to  be  credited  to  the  account  written  on  the  same  line  with  the  amount, 
is  entered  in  the  first  column;  the  discount,  if  any,  in  the  second  column,  and  the  net  amount  of  cash 
received  in  the  third  column.  If  no  discount  is  allowed,  the  same  amount  is  entered  in  both  the 
first  and  third  columns,  because  in  this  case,  each  represents  the  amount  of  cash  received. 

^  2.  Credit  Side.  As  stated  in  §  114,  ^  2,  all  cash  paid  is  entered  on  the  credit  side  of  the  cash 
book.  The  amount  debited  to  the  account  written  on  the  same  line  with  it,  is  entered  in  the  first 
column;  the  discount,  if  any,  in  the  second  column,  and  the  net  amount  of  cash  in  the  third  col- 
umn. If  no  discount  is  received,  the  same  amount  is  entered  in  both  columns,  because  in  this  case, 
each  represents  the  amount  of  cash  paid. 

^3.  To  Prove  Cash.  Foot  each  of  the  three  columns  on  the  debit  side  and  enter  the  total  in 
small  pencil  figures  beneath  the  last  amount.  The  difference  between  the  totals  of  the  first  and  second 
columns  must  be  the  same  as  the  total  of  the  third  column.  Foot  each  of  the  three  columns  on  the 
credit  side  and  place  the  total  in  small  pencil  figures  just  below  the  last  amount.  The  difference 
between  the  totals  of  the  first  and  second  columns  must  be  the  same  as  the  third  column.  The  dif- 
ference between  the  total  of  the  third  column  on  the  debit  side  plus  the  cash  balance  at  the 
beginning  of  the  month,  and  the  total  of  the  third  column  on  the  credit  side  is  the  cash  balance, 
which  is  represented  by  the  money  in  the  bank  and  on  hand.  This  form  is  very  satisfactory  for  proving 
cash,  because  each  side  of  the  cash  book  is  proved  to  be  correct  and  the  balance  is  found  by  taking 
the  difference  between  the  total  receipts  and  payments  which  are  represented  in  the  third  columns. 

Tf  4.  To  Post  from  the  Cash  Book.  Each  amount  written  in  the  first  column  on  the  debit  side 
is  posted  to  the  credit  side  of  the  account  written  on  the  same  line  with  it,  except  a  customer's  ac- 
counts on  which  discount  has  been  allowed.  Instead  of  crediting  the  customer  with  the  one  amount 
(first  column)  written  on  the  same  line  with  his  name,  credit  him  with  the  actual  amount  of  cash 
received  (third  column)  and  on  the  line  below  this,  with  the  amount  of  the  discount  to  which  he  is 
entitled  (second  column).  This  permits  the  credit  man  to  know  at  a  glance  who  discounts  his  bills. 
Each  amount  entered  in  the  second  or  third  column  is  not  posted,  but  the  total  at  the  end  of  the 
month.  At  this  time  post  the  total  of  the  second  column  to  the  debit  side  of  the  Sales  Discount 
account.  The  student  will  note  that  this  is  posted  to  the  debit  side,  which  is  the  reverse  of  the 
usual  posting.  The  reason  for  this  is  because  each  customer  is  credited  for  the  discount,  hence  the 
Sales  Discount  account  must  be  debited  in  order  to  keep  the  debits  and  credits  equal.  The  total 
of  the  third  column  is  not  posted  unless  a  Cash  account  is  kept  in  the  ledger;  if  one  is  kept,  the 
total  is  posted  to  this  account.  In  this  set,  no  Cash  account  will  be  kept  in  the  ledger  unless  the 
teacher  requires  it. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


203 


Each  amount  in  the  first  column  on  the  credit  side  is  posted  to  the  debit  side  of  the  account 
written  on  the  same  Hne  with  it.  This  applies  to  all  amounts,  as  it  is  not  necessary  to  show  the 
discount  deducted  from  a  creditor's  account.  Amounts  entered  in  the  second  and  third  columns 
are  not  posted  until  the  end  of  the  month.  At  this  time  the  Purchases  Discount  account  is  credited 
for  the  total  of  the  second  column.  The  student  will  note  that  this  is  the  reverse  of  the  usual  post- 
ing from  the  credit  side  of  the  cash  book.  The  reason  for  this  is  that  each  creditor  is  charged 
with  the  discount  at  the  same  time  he  is  charged  with  the  amount  of  cash  paid  him,  and  it  is  nec- 
essary to  credit  the  Purchases  Discount  account  in  order  to  keep  the  debits  and  credits  equal. 

The  total  of  the  third  column  is  not  posted  unless  a  Cash  account  is  kept  in  the  ledger.  As 
explained  above,  no  Cash  account  will  be  kept  in  this  set.  Illustration  No.  86  shows  the  debit  side, 
and  No.  87  the  credit  side,  with  sufficient  entries  to  illustrate  the  use  of  the  various  columns.  The 
correct  ruling  for  the  end  of  June  is  shown  at  the  bottom  of  each  illustration. 

TRAVELING  EXPENSE  ACCOUNT. 

§  216.  The  Object  of  this  Account  is  to  show  the  amount  paid  for  the  expenses  of  travel- 
ing men.  In  modern  business  it  is  very  necessary  for  a  representative  to  call  on  the  customers  and 
prospective  customers  and  solicit  orders.  These  representatives,  or  salesmen,  must  spend  money 
for  railroad  fare,  hotel  accommodations,  and  such  other  services  as  they  may  need.  It  is  necessary 
to  keep  an  account  with  each  traveling  man  and  charge  him  with  all  amounts  which  he  receives, 
and  credit  him  with  amounts  paid  in  the  interest  of  the  business.  The  Traveling  Expense  account 
is  a  part  of  the  Selling  Expense  account,  and  is  kept  in  order  to  distinguish  between  the  cost  of  the 
local  sales  expense  and  traveling  sales  expense. 


Debit    Traveling    Expense    Account: 


Credit    Traveling    Expense    Account: 


^  I.     F'or  salaries  of  traveling  men. 

^  2.  For  amounts  paid  for  railroad  fare,  hotel 
accommodations,  livery,  etc.,  as  shown 
by  each  traveling  man's  weekly  or 
monthly  report  of  expenses. 


^  3.     For  any  amount  received  that  decreases 
the  charges  made  to  this  account. 


^  4.  The  Difference  between  the  two  sides  of  this  Account  is  a  loss,  and  appears  in  the  Profit  and  Loss 
statement  as  one  of  the  operating  expenses,  unless  it  is  closed  into  the  Selling  Expense  account  before 
the  statement  is  made.  It  is  best  practice  to  let  the  account  remain  open  and  include  it  with  the 
selling  expenses  on  the  Profit  and  Loss  statement. 

^5.  To  Close  the  Traveling  Expense  Account.  This  account  is  closed  into  the  Profit  and  Loss 
account  by  the  journal  entry  that  closes  those  accounts  affecting  the  Profit  and  Loss  statement.  After 
this  entry  is  posted,  it  will  balance  and  is  ruled  by  single  and  double  red  lines  and  the  footings  en- 
tered in  black  ink. 


y!^^^^<e^^'^A^ 


Illustration  No.  85.     Traveling  Expense  Account. 


204 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Illustration  No.  86.     Debit  Side  of  Cash  Book.— June. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTNG. 


205 


I/uyf2^ 


^~~0^^^i^^ 


Illustration  No.    87.     Credit  Side  of  Cash  Book. — June. 


206 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  217.  Commission  Merchant.  The  commission  merchant  is  one  who  accepts  merchan- 
dise belonging  to  another  and  sells  it  on  the  account  and  risk  of  the  owner,  charging  a  com- 
mission for  his  services.  He  does  not  buy  the  goods  consigned  to  him,  neither  is  he  responsible  for 
them  until  after  they  have  been  sold.  The  person  who  ships  the  goods  is  the  consignor.  The  com- 
mission merchant  who  is  to  sell  them  is  the  consignee.  When  goods  are  shipped  on  consignment, 
it  is  necessary  for  the  shipper  to  keep  a  special  account  with  them,  because  they  are  not  sold. 
The  commission  merchant  does  not  own  the  goods,  but  sells  them  for  the  account  and  risk  of  the 
owner,  hence  he  must  keep  a  special  account  with  them. 

NOTE. — Formerly  this  method  of  selling  merchandise  was  very  popular,  because  it  enabled  the  owner  to  retain 
title  until  the  goods  were  sold  and  permitted  him  to  receive  the  profit  of  any  increase  in  the  market  value.  On  account 
of  many  objections  brought  about  by  experience,  this  method  is  not  very  popular  at  present.  The  progressive  merchant 
prefers  to  buy  the  goods  which  he  sells.  Merchandise  usually  handled  on  consignment  is  either  of  a  perishable  nature,  or 
that  in  which  a  large  investment  is  necessary.  As  an  illustration  of  the  first,  we  have  vegetables,  poultry,  eggs,  etc.  As  an 
illustration  of  the  second,  we  have  cotton  and  some  classes  of  grain.  Even  these  classes  of  merchandise  are  very  often 
purchased  outright.  Sometimes  the  manufacturer  of  a  new  article  will  ship  on  consignment  until  he  has  an  established 
trade. 

SHIPMENT  ACCOUNT. 

§  218.  The  Object  of  this  Account  is  to  keep  a  record  of  goods  shipped  to  some  person  or 
firm  to  be  sold  on  consignment.  This  account  is  kept  by  the  owner  of  the  goods  and  represents  to 
him  their  cost  value.  The  account  is  designated  by  the  name  of  the  person  or  firm  to  whom  the  ship- 
ment is  made,  together  with  the  words,  "Shipment  No.  i,"  for  the  first  shipment.  Additional  ship- 
ments made  to  the  same  party  would  be  numbered  in  consecutive  order. 


Debit  the  Shipment  Account: 


Credit  the  Shipment  Account: 


%  I.     For  the  cost  price  of  goods  shipped  on  ^3. 

consignment. 

^  2.     For  any  amounts  paid  for  freight,  dray-  ^  4. 

age,  or  other  charges  that   serve  to  in- 
crease the  cost  of  the  goods.  ^  5. 


For  all  cash  received  in  payment  of  sales 

for  goods  consigned. 
For  notes  signed  or  drafts  accepted  by 
the  consignee  on   account  of  shipment. 
For  the  net  proceeds  of  the  account  sales. 


T^^'ipc^-y^/^^^^^^^^^^ 


A 


/^' 


r/<^ 


•i       /    V 


J^^ff^ 


Illustration  No. 


-^-3 


yf/ 


^ 


A  Shipment  Account. 


^  6.  The  Difference  between  the  two  sides  of  this  Account  will  show  a  profit  or  a  loss;  a  profit  if 
the  credit  side  is  the  larger,  and  a  loss  if  the  debit  side  is  the  larger.  If  all  the  goods  have  not  been 
sold  at  the  time  the  statements  of  the  business  are  made,  the  value  of  these  is  represented  in  the  Sundry 
Resource  Inventories  account,  and  after  the  ledger  is  closed  the  Shipment  account  will  showthevalue 
of  these  goods  below  the  ruled  line.  The  dilTerence  is  used  in  making  the  Profit  and  Loss  statement, 
and  is  listed  among  the  profits  and  losses. 

^7.  To  Close  the  Shipment  Account.  This  account  is  closed  into  the  Profit  and  Loss  account  by 
the  journal  entry  that  closes  the  accounts  affecting  the  Profit  and  Loss  statement.  After  this  entry 
is  posted  it  will  balance,  and  is  ruled  with  single  and  double  red  lines  and  footed  with  black  ink. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  207 


EXERCISES  IN  SHIPMENT  ACCOUNTS. 


The  following  exercises  are  given  to  familiarize  the  student  with  the  various  debits  and  credits 
that  affect  the  Shipment  account  as  outHned  in  §  218,  T[^  i — 5.  References  are  to  the  paragraph 
numbers.  These  are  not  given  in  every  case,  but  only  where  the  student  may  be  in  doubt  as  to  the 
proper  debit  or  credit.  The  exercises  are  to  be  worked  out  on  ledger  paper  and  handed  to  the  teacher 
for  approval.     Exercise  No.  68  is  shown  in  illustration  No.  88. 

EXERCISE  No.  68.  June  14th,  shipped  to  Byron  Bros.,  Centreville,  50  brls.  Superior  flour, 
cost  $3.60  per  brl. ;  50  brls.  Fancy  flour,  cost  $3.30  per  brl.;  50  brls.  Peerless  flour,  cost  $3.00  per  brl, 
(^  I.)  20th,  received  an  account  sales  showing  the  sales,  also  their  check  for  the  net  proceeds, 
$579-95-  (H  5-)  At  the  close  of  the  fiscal  period,  June  30th,  the  account  is  closed  by  journal  entry 
and  the  balance  transferred  to  the  Profit  and  Loss  account. 

EXERCISE  No.  69.  October  25th,  shipped  Macon  &  Brown,  Chicago,  1,000  bu.  of  Irish 
potatoes  to  be  sold  on  our  account  and  risk.  These  cost  us  59c  per  bu.  (^  i).  25th,  paid  $12.50  for 
having  the  potatoes  loaded  on  the  car  (^  2).  Nov.  loth,  received  check  to  apply  on  account  of  ship- 
ment, $419.65  (^[3);  20th,  they  accepted  our  ten-day  draft  for  $125.00  to  apply  on  account  of  the 
shipment  (^  4).  December  9th,  they  sent  an  account  sales  for  the  remaining  500  bu.  with  a  check 
for  the  net  proceeds,  $291.64  (^  5).  At  the  close  of  the  fiscal  period,  December  31st,  the  account  is 
closed  and  the  balance  transferred  to  the  Profit  and  Loss  account.  Enter  the  difference  as  shown  in 
illustration  No.  88;  rule  the  account  with  single  and  double  red  lines  and  enter  the  footings  in  black 
ink. 

EXERCISE  No.  70.  May  26th,  shipped  the  Central  Commission  Co.,  New  York,  500  crates, 
30  qts.  each,  of  strawberries.  These  cost  us  13c  per  qt. ;  27th,  gave  the  Harold  Transfer  Co.  a  check 
for  $86.75  for  drayage  and  packing  the  strawberries  on  the  car.  June  1st,  paid  $1.25  for  telegram 
on  account  of  shipment;  loth,  they  accepted  a  five-day  draft  for  $1,000.00,  on  account  of  shipment; 
15th,  received  a  check  for  $400.00  on  account  of  shipment;  23d,  they  sent  us  a  note  for  $118.75,  which 
was  transferred  to  them  in  payment  for  some  of  the  berries  sold  from  the  shipment;  26th,  received  an 
account  sales  showing  the  net  proceeds  to  be  $1,765.25,  and  their  check  for  the  balance  due  after 
deducting  payments  previously  made. 


CONSIGNMENT  ACCOUNT. 


§  219.  The  Object  of  this  Account  is  to  show  the  amounts  paid  and  received  for  goods  to 
be  sold  on  consignment.  It  is  the  account  that  the  commission  merchant  keeps  with  the  goods 
received  from  the  owner  to  be  sold  on  consignment.  The  account  is  not  affected  unless  the  commis- 
sion merchant  exchanges  property  for  the  benefit  of  the  consignment  or  receives  property  in  exchange 
for  sales  of  goods  belonging  to  the  consignment.  An  account  is  kept  with  each  quantity  of  goods 
received.  It  is  designated  by  the  name  of  the  consignor  (owner),  followed  by  the  word  "Consign- 
ment" and  the  number.  The  first  consignment  received  from  Robison  Bros,  is  named  "Robison 
Bros.'   Consignment  No.    i,"  the  second   "Robison   Bros.'   Consignment  No.  2,"  etc. 


208 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Debit  the   Consignment   Account: 


Credit  the   Consignment  Account: 


^  I .  For  any  amount  paid  for  freight,  drayage, 
or  any  services  in  handling  the  mer- 
chandise belonging  to   the  consignment. 

^  2.  For  any  amounts  paid,  notes  given,  or 
drafts  accepted,  as  part  payment  of  the 
goods  sold. 

^  3.  For  the  charges  made  at  the  time  the 
account  sales  is  rendered,  which  is 
usually  for  drayage,  storage,  insurance 
and  commission. 

^4.  For  the  net  proceeds,  which  is  the  net 
amount  due  the  owner  after  all  the 
goods  have  been  sold,  and  the  charges 
mentioned  in  ^^  i,  2  and  3  have  been 
made. 


^  5.     For  all  cash  or  credit  sales  of  merchan- 
dise belonging  to  the  consignment. 


^  6.  The  Balance  of  this  Account  will  show  a  resource  or  a  liability;  a  resource  if  the  debit  side 
is  the  larger,  and  a  liability  if  the  credit  side  is  the  larger.  The  amounts  that  appear  on  the  debit 
side  represent  charges,  and  the  amounts  on  the  credit  side,  sales.  If  the  net  charges  exceed  the  sales, 
the  consignor  owes  the  commission  merchant  this  amount.  If  the  net  sales  exceed  the  charges,  the 
commission  merchant  owes  the  consignor  the  difference.  This  difference  appears  in  the  Financial 
statement  either  as  a  resource  or  a  liability,  as  explained.  The  value  of  goods  on  hand  is  not  consid- 
ered, because  they  beloj^g  to  the  consignor. 

*|f  7.  To  Close  the  Consignment  Account.  This  account  is  not  closed  until  the  account  sales 
is  rendered.  After  the  journal  entry  for  the  charges  has  been  posted,  the  two  sides  are  equal  and 
the  account  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink.  If  there  are  any  goods 
on  hand,  the  value  of  these  will  not  be  shown  on  the  account  in  dollars  and  cents,  because  they  rep- 
resent nothing  to  the  commission  merchant,  being  the  property  of  the  consignor.  A  note  of  the  quan- 
tity should  be  made  on  the  debit  side  for  reference  in  rendering  the  net  account  sales.  Illus- 
tration No.  89  shows  the  form  of  the  Consignment  account. 


7^/ 


^-r.^.^/  # 


e>Ci>^^ZX^^Z^-tz^^^^ 


'A/Jt. 


^fx/ 


^ 

^'^ 
^ 


y  ^ 


-2-  -^^ 
J    ^  9 


^^^^^ 


^js-y 


'^'^'Z'/'^'****'*'^^  f 


Illustration  No.  89.     A  Consignment  Account. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


209 


EXERCISES  IN  CONSIGNMENT  ACCOUNTS. 

The  following  exercises  are  given  to  familiarize  the  student  with  the  various  debits  and  credits 
as  outlined  in  §  219,  ^^  i — 5.  References  are  given  to  the  paragraph  numbers;  these  are  not  given 
in  every  case,  but  only  where  the  student  may  be  in  doubt  as  to  the  proper  debit  or  credit.  The  exer- 
cises are  to  be  worked  out  on  ledger  paper  and  handed  to  the  teacher  for  approval.  Exercise  No.  71 
is  worked  out  in  illustration  No.  89. 

EXERCISE  No.  71.  June  12th,  accepted  carload  of  hay  from  Rosenbeck  &  Williams,  Spring- 
field, to  be  sold  on  consignment  and  paid  $2.50  for  unloading  it  from  the  car  (^  i) ;  i6th,  sold  for  cash, 
200  bales,  20,119  lbs.,  hay  at  $14.00  (^  5) ;  i6th,  gave  the  C,  N,  O.  &  T.  P.  Ry.  Co.  a  check  for  $59.47, 
freight  charged  on  hay  (^  i);  21st,  sold  for  cash,  290  bales,  28,365  lbs.  hay  at  $14.00  (^  5);  26th,  sent 
them  an  account  sales.  Our  charges  were  2C  per  bale  drayage,  ic  per  bale  storage,  1%  of  the  sales 
for  insurance,  and  5%  for  commission  (^  3).    We  enclosed  check  for  the  net  proceeds  (1[4). 

EXERCISE  No.  72.  November  5th,  received  from  Davis  &  Bros.,  of  Cleveland,  5,000  baskets 
of  grapes.  The  shipping  invoice  shows  that  these  cost  them  9J^c  per  basket;  7th,  gave  the  C.  C.  C. 
&  St.  L.  Ry.  Co.  a  check  for  $107.65  to  pay  freight  on  the  grapes.  (T[  i) ;  8th,  sold  for  cash,  1,000  baskets 
of  grapes  at  14c  (*[[  5);  9th,  paid  80c  for  telegram  on  account  of  consignment  (^  2);  12th,  sold  the 
Central  Grocery  Co.,  on  account,  2,000  baskets  of  grapes  at  14c  (T[  5);  13th,  accepted  draft  at  ten- 
days  for  $150.00  on  account  of  the  consignment  (^f  2);  14th,  sold  for  cash,  500  baskets  at  14c  (^  5); 
1 6th,  sold  1,500  baskets  at  13 He  for  cash;  20th,  rendered  an  account  sales  of  the  consignment; 
charged  J^c  a  basket  for  storage,  He  a  basket  for  drayage,  $10.00  for  insurance  and  4%  for  our  com- 
mission (T[3);  sent  check  for  the  net  proceeds  (T[  4). 

EXERCISE  No.  73.  June  5th,  received  from  the  Florida  Commission  Co.,  Jacksonville, 
1,000  watermelons  to  be  sold  on  their  account  and  risk;  6th,  paid  for  help  for  unloading  and  trans- 
ferring to  the  warehouse,  $12.50;  7th,  sold  for  cash,  200  melons  at  28c;  9th,  sold  T.  E.  Burns  &  Co., 
150  melons  at  28c;  12th,  paid  90c  for  telegram  on  account  of  consignment;  14th,  collected  40c  for  one 
of  the  melons  which  was  broken  by  the  carelessness  of  the  driver,  and  which  he  was  allowed  to  eat 
(1  5);  15th,  sold  for  cash,  300  melons  at  27c;  i8th,  sent  the  consignor  a  check  for  $50.00  on  account 
of  consignment;  22d,  sold  W.  R.  Carter  &  Son,  100  melons,  at  26c;  27th,  accepted  ten -day  draft  for 
$75.00  on  account  of  consignment;  28th,  sold  for  cash,  125  melons  at  27c;  July  3d,  sold  for  cash  the 


Invoice  of  Shipment 


Invoice  of 
Shipped  via 

C.  W.  Keeland  &  Co  .  Consignors. 


y^,  191 


to  be  sold  for  account  and  risk  of 


Illustration  No.  90.     An  Invoice  of  Shipment. 


210 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


remainder  of  the  melons  at  24c;  6th,  rendered  an  account  sales  and  sent  check  for  the  net  proceeds. 
Our  charges  were  ic  per  melon  for  drayage;  ic  per  melon  for  storage;  1%  of  the  sales  for  insurance; 
4^%  of  the  total  sales  for  commission. 

§  220.  Shipping  Invoice.  This  is  a  blank  used  by  the  owner  on  which  to  list  the  goods  shipped 
on  consignment.  It  is  the  same  form  as  a  bill,  but  differs  in  that  the  title  of  the  goods  remains 
in  the  owner's  name,  while  in  a  bill,  the  title  to  the  goods  passes  to  the  purchaser.  It  is  customary 
to  show  the  cost  price  of  the  merchandise  on  the  shipping  invoice,  that  the  commission  merchant 
may  know  the  cost  and  can  endeavor  to  sell  it  at  such  a  price  as  will  give  him  (the  owner)  a  profit. 
Illustration  No.  90  shows  the  usual  form. 

§  221.  Account  Sales.  This  is  a  blank  on  which  the  commission  merchant  reports  the 
sales  of  goods  shipped  on  consignment.  It  is  arranged  to  show  the  quantity  of  merchandise  received, 
the  articles  sold  and  the  various  charges.  When  made  out  correctly,  the  owner  can  ascertain  the 
quantity  of  goods  sold,  the  various  charges  and  what  they  are  for,  and  know  if  there  are  any  goods 
remaining  on  hand.  The  amount  due  the  owner  for  the  sale  of  his  goods,  which  is  the  gross  amount 
of  sales,  less  all  charges,  is  the  net  proceeds.  The  commission  merchant  may  pay  this  or  pass  it  to 
he  credit  of  the  owner's  account.     Illustration  No.  91  shows  a  popular  form  of  an  account  sales. 


Account  Sales. 


June  25 


Si    Rosenbeck  &  Willjams 


Jlddress       S-prJDgfleld 


J9I. 


Sielow  please  find  aeeount  sales  of  SHerehandise 

Sold  by      C.    W.    KEIEILAND    Sc    CO. 

Steeeioed ^^^^^   11 /py 

ot     Yourselves 


and  sold  lor  aeeount 


June 

16 

Sales 

200  bales.    20119#.    Hay.                      $14.00 

140 

83 

21 

290        "          28365",      "'                            14.00 

198 

66 

339 

39 

10  balee   too  badly  damaged   to  be 

sold. 

Charges 

tJreighl  2)rayage  Storage   Snsuranee  Commission  Jidoanees 

^59.47^9,80    ^4.90    ^3.39    ^16.79     ^2.50 

97 

03 

S)let  Sroeeeds  by      Check 

P.4?. 

36 

Illustration  No.  91.     Account  Sales. 
COMMISSION  ACCOUNT. 

§  222.  The  Object  of  this  Account  is  to  show  amounts  received  or  paid  for  commission.  It 
represents  amounts  paid  others  for  services  rendered  the  business,  and  amounts  paid  the  business 
for  services  rendered  others.     The  account  is  used  in  connection  with  the  commission  business. 


Debit  the   Commission  Account: 
^  I.     For  the  value  of  any  property  given  in 
exchange  for  services  rendered  the  busi- 
ness on  a  commission  contract. 


Credit  the   Commission  Account: 
^  2.     For  the  value  of  property  received  from 
others  in  exchange  for  services  rendered 
them  by   us  on   a  commission   proposi- 
tion 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


211 


^  3.  The  Difference  between  the  two  sides  of  this  Account  will  show  a  profit  or  a  loss;  a  profit  if 
the  credit  side  is  the  larger,  and  a  loss  if  the  debit  side  is  the  larger.  It  is  listed  on  the  Profit  and  Loss 
statement  after  the  regular  profits  or  losses  have  been  listed. 

^  4.  To  Close  the  Commission  Account.  This  account  is  closed  into  the  Profit  and  Loss  account 
by  the  journal  entry,  which  closes  the  accounts  afTecting  the  Profit  and  Loss  statement.  After  this 
journal  entry  has  been  posted,  the  account  will  balance  and  is  ruled  with  single  and  double  red  lines 
and  footed  in  black  ink.     (See  Note,  page  138.) 


^ 


^^^^h^^^^'^^^^^^^.d^iC^;^^ 


^^y^id^fC^i^  ^u 


/  ^ 


CX 


^^yf^^'^^^y.^^y^  /,    {^/J 


^^ 


Illustration  No.  92.     The  Commission  Account. 


§  223.  C.  O.  D.  Shipments.  When  goods  are  sold  and  the  purchaser  agrees  to  pay  for  them 
on  delivery,  they  are  shipped  out  C.  O.  D.,  that  is,  "Collect  on  delivery."  If  the  customer  lives 
in  the  same  city,  the  representative  who  delivers  the  merchandise  makes  collection  before  deliver- 
ing it.  If  he  lives  out  of  the  city,  they  must  be  shipped  to  him  by  some  transportation  com- 
pany, which  may  be  either  freight  or  express.  It  is  not  good  policy  to  send  goods  C.  O.  D.,  unless 
some  part  of  the  purchase  price  is  paid,  because  the  purchaser  might  decline  to  accept  them  when 
delivered.  This  is  especially  true  with  out-of-town  shipments.  If  the  purchaser  refuses  to  accept 
the  goods  and  the  seller  has  not  collected  some  part  of  the  shipment,  he  may  lose  the  transportation 
charges  both  ways.  Unless  a  C.  O.  D.  shipment  is  made  to  a  person  who  has  a  financial  rating, 
it  is  customary  to  require  a  payment  sufficient  to  cover  transportation  charges  both  ways  and  the 
trouble  of  returning  the  shipment. 

\  I.  Freight  Shipments.  When  a  C.  O.  D.  shipment  is  made  by  freight  the  shipper  addresses 
the  package  to  himself  at  the  point  to  which  the  shipment  is  made.  He  makes  a  bill  for  the  amount 
of  the  sale  and  mails  it  to  the  purchaser.  A  C.  O.  D.  bill  of  lading  is  made  and  signed  by  the  agent  of 
the  railroad  company.  Instead  of  being  made  in  favor  of  the  purchaser,  it  is  made  in  favor  of  the  seller 
and  marked,  "Notify  C.  A.  Jones  &  Co.,"  or  whatever  the  name  of  the  purchaser  may  be.  A  draft 
is  drawn  in  favor  of  a  local  bank,  or  some  bank  in  the  city  where  the  purchaser  lives,  and  attached 
to  the  bill  of  lading.  Both  of  these  are  endorsed,  then  sent  to  the  bank  for  collection.  The  bank  noti- 
fies the  purchaser  that  it  holds  the  draft.  The  railroad  company  notifies  the  purchaser  when  the  goods 
are  delivered.  The  purchaser  then  goes  to  the  bank,  pays  the  draft,  gets  the  bill  of  lading,  and  upon 
presentation  of  this  can  receive  the  goods.  Special  arrangements  may  be  made  whereby  the  pur- 
chaser can  have  the  privilege  of  examining  the  goods  before  honoring  the  draft;  but  unless  there 
are  special  arrangements,  he  can  not  have  access  to  them  until  the  draft  is  paid. 

A  special  form  of  bill  of  lading  is  required.  This  does  not  differ  materially  from  illustrations 
Nos.  79-81,  except  a  blank  space  is  provided  on  the  back  for  the  endorsement.  This  special  form  will 
be  illustrated  later  in  the  course. 

^  2.  Express  Shipments.  When  a  C.  O.  D.  shipment  is  made  by  express,  the  Express  Company 
will  not  deliver  it  until  the  purchaser  pays  the  charges  and  the  value  of  the  shipment.  A  bill  is  made 
for  the  amount  of  the  shipment  and  enclosed  in  a  special  envelope  provided  by  the  Express  Company. 
The  envelope,  which  is  marked  in  large  letters,  "C.  O.  D.,"  accompanies  the  package.  When  it  reaches 
destination,  the  express  agent  notifies  the  purchaser  to  call  and  receive  it,  or  sends  it  out  by  wagon. 


212 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Upon  payment  of  the  amount  mentioned  in  the  bill  and  charges,  if  so  indicated  on  the  C.  O.  D.  enve- 
lope, the  agent  delivers  the  package  to  the  purchaser.  The  money  received  from  the  purchaser  is 
sent  to  the  seller.  Sometimes  the  Express  Company  will  return  the  same  money  received,  and 
sometimes  it  will  retain  the  money  and  send  an  Express  Money  Order,  or  a  C.  O.  D.  check  payable  by 
the  company.  The  latter  method  is  becoming  more  popular,  because  it  avoids  the  loss  of  money  which 
might  be  appropriated  by  some  employee.  If  the  Express  Money  Order  is  sent  through  the  mail  and 
lost,  it  is  worth  nothing  to  the  finder,  because  it  must  be  endorsed  by  the  seller.  Illustration  No.  93 
shows  the  form  of  special  envelope  provided  by  the  Express  Company  for  containing  the  invoice  for 
a  C.  O.  D.  shipment. 


After  5  Days,  return  to 

United  States  Express  Co. 

TREASURER'S  OFFICE, 
a  RECTOR  8TREET,  NEW  YORK.  N.  V. 


^1 


D. 


Postmaster 

Forward  to. 


United  States  Express 

TRAVELERS  CHECKS 

preferable 
to  other  companies. 


C.  W.   Keelend  &  Co. 


PLACE 

PpSTACB 

STAMP 

HERE. 


/D 


208  Coimaerce  Street. 


(17»)    This  C.  O.  D.  must 
be  returned  to   the 

No.. 


CD 

a 

CO 

o 
Ct3 


UNITED  STATES  EXPRESS  COMPANY 

(Paid  or  Unpaid  at 

C.O.D.  _ 


For  Callection 


Retu'rn  Charges. 


Jtme  26,  191 


Postmaster  forward  to  address  on  reverse  side 
On Merxdan.- Hotel 


U&in  &  Sixth 


Street 

City ^.^Jl^.^Rr. __ State 


MTICE  TO  llllPWIIS.-OoodifubiecttoC.O.D.fcreMceptedMaforwMded  by  ibis  Company  ONLY,  BccordinK  to  tbe  cooditions  of  Us  receipt 
•ndlU  Rules  and  Instructions  to  Agents.    If  the  money  to  be  collected  from  the  consignee  on  delivery  of  the  property  described  herein  is  not 
paid  within  thirty  days  from  date  of  this  Company's  receipt,  the  shipper  agrees  that  this  Company  may 
of  ihax  time,  subject  to  the  Conditions  of  this  Company' 

of  th'sCrtiB 


iid  property  to  him  a  I  the  expiration 
»(n;i,i.u  «.n  ^«..«.i..u...  v..  wu— ^«»-K— J  = -^Jipt.  that  he  will  pay  thecharges  for  transporUtioD  both  M-aya,  and  that  tbe  liability 
for  ^arh  property.  wbMe  In  fu  oofwesitiop.  for-  the  purpose  of  making  auoh  collection,  shall  be  that  of  warehoussmen  only. 


Illustration  No.  93.     Both  Sides  of  an  Express  C,  O.  D.  Envelope. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


213 


QUESTIONS. 


I. 


8 
9 

10 
II 


Describe  the  form  of  cash  book  used  in 

June.    (§  215.) 
Describe    the    method    of    proving    cash. 
Name  some  advantages  of  this  form  over 

that  used  in  April  and  May. 
Describe  the  method  of  posting  from  the 

June  form  of  the  cash  book. 
Where  is  the  total  of  the  discount  column 

on  each  side  posted?     Why? 
Define    the   Traveling    Expense    account. 

(§  216.) 
Name    the   two    special    debits    and    the 

two  special  credits. 
What  does  the  difference  show? 
Why  is  it  a  part  of  the  Selling  Expense 

account? 
Define  the  Commission  Merchant,  (§  217.) 
Can  you  name  any  class  of  goods  that 

could  be  handled  to  a  better  advan- 
tage on  consignment? 


12 
13 

14 
15 
16 

17 
18 

19 
20 
21 
22 

23 

24 

25 


26. 


Define    the    Shipment    account.      (§  218.) 
Name  the  two  special  debits  and  three 

special  credits. 
What  does  the  difference  show? 
Define  the  Consignment  account.  (§  219.) 
Name  the  three  debits  and  one  credit. 
What  does  the  difference  show? 
How  is  this  account  closed? 
Define   a  Shipping   Invoice.      (§  220.) 
Define  an  Account  Sales.     (§  221.) 
Define  the  Commission   account.    (§  222.) 
Name  the  debits  and  credits. 
What  does  the  difference  show? 
Define  C.   O.   D.    shipments.     (§  223.) 
Describe    the  method   of  making  out  the 
bill   of   lading   and    marking  the  pack- 
age when  a  C.  O.  D.  shipment  is  made 
by  freight. 
Describe  the  method   when   a   C.   O.   D. 
shipment  is  made  by  express. 


JOURNAL  ENTRIES  AND  STATEMENTS. 


EXERCISE  No.  74.  i.  July  ist.  Bought  of  W.  L.  Lawson  for  $16,500.00  one-half  interest 
in  the  Davis  Mill  at  Ducktown,  paying  for  the  same  as  follows:  Real  estate,  cost  value,  $3,000.00; 
note  signed  by  Earl  Robinson  (Notes  Receivable),  dated  March  i6th,  due  in  six  months  with  interest 
at  6%  from  date,  $2500.00;  twenty-five  shares  of  First  National  Bank  stock  valued  at  $169.50  per 
share;  a  Certificate  of  Deposit  for  $5,000.00,  dated  March  ist,  with  interest  at  4%  ;  check  for  the  balance. 

Make  the  required  journal  entry. 

2.  January  1st.  R.  D.  Wolf,  C.  B.  Lowery  and  A.  C.  Witt  form  a  partnership  for  the  pur- 
pose of  engaging  in  the  retail  clothing  business.  Mr.  Wolf  invests  cash,  $5,000.00;  a  certificate  of  de- 
posit for  $1,500.00,  dated  August  ist,  with  4%  interest  from  date;  a  note  for  $2,000.00.  dated  August 
17th,  due  in  seven  months,  with  interest  at  7%  from  date;  an  account  owed  him  by  W.  O.  Watson 
for  $1,327.85.  Mr.  Lowery  invests  cash,  $1,000.00;  stock  of  goods  on  hand  valued  at  $6,871.92;  note 
due  him  for  $917.96,  dated  September  9th,  and  due  in  four  months,  with  interest  at  8%  from  date; 
accounts  receivable,  $1,496.91,16532%  reserve  for  bad  debts;  office  equipment,  cost  value,  $1,200.00, 
less  10%  for  depreciation;  store  fixtures  valued  at  $1,500.00,  less  10%  for  depreciation;  the  new  firm 
assumes  a  note  due  the  First  National  Bank  for  $1,500.00,  dated  October  1st,  and  due  in  five  months, 
with  6%  interest  from  date;  an  account  due  Bush  &  Co.  for  $750.00.  A.  C.  Witt  invests  real  estate 
(storehouse  in  which  they  are  to  do  business)  valued  at  $5,000.00;  cash,  $2,000.00;  a  note  for  $3,000.00 
dated  August  17th,  due  in  six  months,  with  interest  at  5%  from  date;  a  judgment  against  A.  H. 
Jamison  for  $665.87,  obtained  May  i6th,  with  interest  at  6%  from  date.  He  guarantees  that  the 
judgment  will  be  paid  within  eight  months  after  date. 

Make  a  journal  entry  for  the  investment  of  each.  The  office  equipment,  store  fixtures  and 
personal  accounts  invested  by  Mr.  Lowery  are  entered  at  their  cost  value,  and  the  proper  deprecia- 
tion accounts  credited  for  the  depreciation,  and  reserve  for  bad  debts.  The  judgment  is  entered  by 
writing  the  name  of  the  person  against  whom  it  is  obtained  and  the  word  "Judgment"  after  it.  A 
full  explanation  must  be  given  for  the  investment  of  each. 


214  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

3.  October  1st.  Davis  Bros,  owe  the  First  National  Bank  a  note  for  $1,500.00,  due  today.  They 
pay  this  by  giving  them  a  new  note  for  $1,000.00,  due  in  sixty  days,  and  check  for  the  balance  and 
interest  on  the  new  note  for  the  time  it  is  to  run.  at  7>2%-     Make  the  required  journal  entry. 

4.  August  1st.  Lady  &  Mann  owe  us  $1,865.50,  which  is  the  amount  of  an  invoice  purchased 
April  5th,  terms,  n  /60.  They  settle  this  by  transferring  a  note  for  $1,200.00,  signed  by  W.  H.  White, 
dated  June  ist,  due  in  four  months,  with  interest  at  6%  from  date,  and  their  check  for  the  balance. 
We  charge  them  interest  on  the  account  for  the  number  of  days  it  is  overdue  and  give  them  credit 
for  the  accrued  interest  on  the  note. 

5.  September  ist.  Widener  &  Son  owe  W.  A.  Cottrell  $416.87;  W.  A.  Cottrell  owes  W.  C. 
Fulcher  $627.65,  which  is  for  an  invoice  purchased  August  25th,  terms,  5% — 10  days,  net  60.  Mr. 
Cottrell  draws  a  three-days'  draft  on  Widener  &  Son  and  sends  it  to  W.  C.  Fulcher  as  part  payment 
of  the  amount  he  owes  Mr.  Fulcher. 

Make  the  journal  entry  each  of  these  parties  would  make  on  his  books. 

6.  October  ist.  We  owe  Spencer  Bros.  $1,686.75,  which  is  for  an  invoice  purchased  September 
22d,  terms,  3/10 — n /30.  Spencer  Bros,  agree  to  accept  our  sixty-day  note  in  payment  for  this,  less 
discount,  provided  we  will  make  the  note  for  such  an  amount  that  when  discounted  at  the  bank  at 
7%  the  net  proceeds  will  equal  the  invoice,  less  discount.     We  accept  their  proposition. 

Make  the  journal  entry  that  each  would  make  on  his  books,  assuming  that  Spencer  Bros,  dis- 
counted the  note  at  their  bank  the  day  it  was  received. 

7.  January  ist.  W.  H.  Satterfield,  Walter  Graham  and  C.  H.  Hobson  form  a  partnership  for 
the  purpose  of  engaging  in  the  wholesale  grocery  business.  Each  partner  is  to  receive  interest  on  the 
amount  invested  and  to  be  charged  with  interest  on  any  amounts  withdrawn.  At  the  end  of  the 
year  the  profits  are  to  be  shared  in  proportion  to  the  net  amount  invested  during  the  year,  after 
the  entry  for  the  interest  has  been  made. 

At  the  beginning  each  invests  $3,000.00  in  cash;  February  7th,  Mr.  Satterfield  invests  $1,400.00; 
February  21st,  Mr.  Graham  invests  $2,500.00;  March  ist,  Mr.  Satterfield  withdrew  $100.00;  March 
9th,  Mr.  Graham  withdrew  $500.00;  March  17th,  Mr,  Hobson  invests  $500.00;  March  25th,  Mr, 
Hobson  withdrew  $350.00;  April  6th,  Mr.  Graham  invests  $2,000.00;  April  7th,  Mr.  Satterfield  in- 
vests $2,500.00;  April  27th,  Mr.  Hobson  invests  $800.00;  May  5th,  the  firm  gave  Robert  Clark  a  check 
for  $1,762.85,  which  is  charged  to  Mr.  Satterfield's  account;  May  7th,  Mr.  Graham  withdrew  $350.00; 
May  19th,  Mr.  Hobson  withdrew  $862.50;  June  5th,  Mr.  Satterfield  invests  $1,500.00;  June  i8th 
Mr.  Graham  transferred  to  the  firm,  as  an  investment,  a  Certificate  of  Deposit  for  $2,400.00,  dated 
March  5th,  with  interest  at  4%  from  date:  June  i6th,  Mr.  Hobson  invests  $1,600.00;  June  27th, 
Mr.  Satterfield  invests  $2,150.00;  June  29th,  Mr.  Graham  withdrew  $1,250.00;  August  ist,  Mr.  Sat- 
terfield withdrew  $875.00;  August  29th,  Mr.  Hobson  withdrew  $962.50;  September  5th,  Mr.  Sat- 
terfield invests  $1,500.00;  September  27th,  Mr.  Graham  invests  $3,267.00;  August  9th,  Mr.  Hobson 
invests  $2,250.00;  November  5th,  Mr.  Satterfield  withdrew  $2,165.70;  November  i6th,  Mr.  Graham 
withdrew  $625.00:  November  28th,  Mr,  Hobson  withdrew  $1,427.62. 

At  the  end  of  the  year,  December  31st,  the  Financial,  and  Profit  and  Loss  statements  show 
a  net  gain  of  $8,627,85,  Each  partner's  Capital  account  is  credited  with  his  share  of  the  net  gain 
according  to  the  agreement. 

Open  accounts  with  each  partner,  crediting  him  with  the  investments  and  interest  on  each,  from 
the  time  it  was  made  up  to  and  including  December  31st,  and  charge  him  with  withdrawals  and 
interest  on  amounts  withdrawn.  Open  an  account  with  interest,  and  debit  and  credit  this  as  the 
partners'  accounts  are  debited  and  credited.  Deduct  the  net  amount  of  interest  from  the  profits, 
and  credit  each  partner  with  his  share,  according  to  the  agreement.  Rule  the  interest  account,  the 
three  Partners'  accounts,  and  write  the  Present  Capital  of  each  on  the  credit  side  below  the  ruling. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  215 


8.  The  firm  of  Rankin  &  Henry  conduct  a  branch  store  at  No.  6242  Euclid  Avenue.  They 
have  agreed  to  sell  this  to  G.  M.  Craft,  the  manager,  for  $75,000.00.  He  makes  settlement  as  fol- 
lows: Cash,  $1,500.00;  a  note  signed  by  C.  D.  Dorley  for  $692.11,  with  accumulated  interest  (6%) 
for  seventy -five  days ;  real  estate  valued  at  $1,250.00;  ten  shares  of  Union  Gas  Co.  stock,  valued  at 
$113.00  per  share;  balance  on  account.     Make  the  required  journal  entry. 

9.  October  ist.  Day  &  Howe  owe  Roberts  Bros.  $384.16,  which  is  for  invoice  purchased  Sep- 
tember 22d,  terms,  4/10 — n/30.  The  bookkeeper  sends  a  check  for  $378.14  to  pay  for  this.  Make 
the  entry  he  would  make  on  his  books.  October  6th  Day  &  Howe  received  a  letter  from  Roberts 
Bros.,  calling  their  attention  to  the  fact  that  the  check  sent  October  ist  overpaid  their  account,  and 
enclosing  check  for  the  overpayment.  Make  the  entry  the  bookkeeper  for  Day  &  Howe  would  make 
on  his  books  for  this  check. 

10.  December  13th.  The  bookkeeper  for  Day,  Moxley,  and  Hatcher  makes  the  Financial 
Trading,  and  Profit  and  Loss  statements  for  the  fiscal  period.  After  the  required  journal  entries 
have  been  made  at  the  end  of  the  fiscal  period  (§  199,  ^T[  i — 3),  the  Trial  Balance  shows  the  following: 

Chas.  Day,  Capital,  Dr.  $650.00,  Cr.  $6,000.00;  Wm.  Moxley,  •  Capital,  Dr.  $400.00,  Cr. 
$4,000.00;  H.  D.  Hatcher,  Capital,  Cr.  $4,000.00;  Chas.  Day,  Personal,  Dr.  $87.65;  Wm.  Moxley, 
Personal,  Cr.  $186.92;  H.  B.  Hatcher,  Personal,  Dr.  $125.91;  Inventory,  Dr.  $4,862.24;  Purchases, 
Dr.  $10,864.48;  Cr.  $374.96;  Sales  Discount,  Dr.  $629.50,  Cr.  $10.00;  Purchases  Discount,  Dr. 
$20.10,  Cr.  $586.46;  Freight  In,  Dr.  $1,051.67,  Cr.  $13.91;  Sales,  Dr.  $369.74,  Cr.  $15,616.68; 
Cash  Balance,  $4,680.52;  Selling  Expense,  Dr.  $927.62;  Insurance,  Dr.  $300.00,  Cr.  $150.00;  Gen- 
eral Administrative  Expense,  Dr.  $1,454.09,  Cr.  $62.95;  Real  Estate,  Dr.  $10,000.00,  Cr.  $5,000.00; 
Real  Estate  Expense  and  Revenue,  Dr.  $626.95,  Cr.  $71.73;  Notes  Receivable,  Dr.  $1,452.65;  Notes 
Payable,  Cr.  $1,650.00;  Furniture  and  Fixtures,  Dr.  $865.96;  Reserve  for  Depreciation  of  Furni- 
ture and  Fixtures,  Cr.  $165.90;  Accounts  Receivable,  Dr.  $3,586.42;  Accounts  Payable,  Cr.  $4,808.21; 
Reserve  for  Bad  Debts,  Cr.  $71.73;  Sundry  Liability  Inventories,  Cr.  $294.80;  Sundry  Resource 
Inventories,  Dr.  $108.75;  salable  merchandise  on  hand,  at  end  of  fiscal  period  is  $3,621.52. 

From  these  facts  make  the  Financial,  Trading,  and  Profit  and  Loss  statements.  It  will  be  best 
to  copy  the  accounts  on  a  sheet  of  journal  paper,  and  prove  that  the  Trial  Balance  is  in  balance  be- 
fore making  the  statements.     The  net  profit  or  loss  is  shared  equally. 

11.  May  15th.  Ogden  Bros,  owe  Chatfield  &  Woods  Co.  $491.86,  which  is  for  an  invoice  pur- 
chased May  6th,  terms,  3/10 — n/30.  Ogden  Bros,  send  their  check  in  payment  for  this,  less  discount. 
Make  the  entries  for  each  party.  May  i8th,  they  receive  a  letter  from  Chatfield  &  Woods  Co. 
advising  them  that  there  was  an  error  of  $20.00  in  their  (O.  Bros.)  favor  in  the  invoice  which  they 
paid,  and  enclosing  their  check  for  the  amount  of  the  error,  less  the  discount  which  had  been  de- 
ducted. Make  the  entries  for  each,  assuming  that  Ogden  Bros,  charged  all  goods  purchased  to 
the  Purchases  account. 

12.  June  i6th.  Dallas  Bros,  receive  an  invoice  from  Green  &  Block  for  $927.36,  terms,  5/10 
— n/6o.  June  25th,  they  send  their  check  in  payment  for  this,  lejss  discount.  Make  the  required  cash 
book  entry.  July  ist,  Dallas  Bros,  receive  two  cases  supposed  to  be  the  goods  invoiced  on  the  i6th. 
When  opened,  it  is  found  that  one  case  belongs  to  them,  and  the  other,  to  some  other  firm.  They  find 
that  they  can  make  out  with  the  one  case  received  (value  of  contents,  $619.65),  and  wire  Green  & 
Block  this  information,  also,  for  disposition  of  the  other  case.  Green  &  Block  instruct  them  to  de- 
liver this  case  to  J.  A.  Hickman,  and  draw  on  them  at  sight  for  the  overpayment  on  the  invoice  of 
the  i6th.  This  is  done  and  the  draft  deposited  in  the  bank  as  cash.  Make  the  cash  book  entry  that 
the  bookkeeper  for  Dallas  Bros,  would  make  on  his  books. 

13-  July  6th.  We  sold  Hood  &  Hasper  a  bill  of  goods  amounting  to  $1,879.46,  terms,  3/10 — 
n/6o.  On  the  15th,  they  settle  for  this  as  follows:  Our  note  for  $500.00  (Notes  Payable),  which  they 
hold,  dated  May  5th,  and  due  in  sixty  days;  a  thirty-day  draft  on  the  Central  Coal  Co.  of  this  city, 
for  $461.98,  which  they  have  accepted;  their  check  for  $500.00;  balance  on  account.  We  allow  them 
the  disaount  on  all  the  payments,  but  deduct  6%  interest  for  30  days  from  the  draft  accepted  by  the 
Central  Coal  Co.     Make  the  required  journal  entry. 


216  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

14.  A.  B.  &  C.  are  equal  partners  in  the  retail  business.  At  the  end  of  the  year,  after  the 
books  have  been  closed,  their  capital  accounts  stand  as  follows:  A,  Dr.  $1,687.42,  Cr.  $9,841.78; 
B,  Dr.  $921.75,  Cr.  $8,311.42;  C.  Dr.  $2,500.00,  Cr.  $9,471.12.  They  wish  their  accounts  to  show 
the  same  amount  invested,  and  have  made  a  settlement  with  each  other  to  this  effect.  Make  an 
entry  which  will  give  this  result,  and  show  the  accounts  required  for  making  the  adjustment. 

NOTE. — The  partner  who  has  the  least  in  the  business  will  have  to  pay  the  others  such  an  amount  as  will  make 
his  account  equal  theirs.  This  amount  will  not  come  into  or  go  out  of  the  business,  as  it  is  a  private  agreement.  What 
is  required  of  you,  is  to  make  a  journal  entry  which,  when  posted,  will  make  their  accounts  show  the  same  results;  also 
inform  them  who  will  receive  and  pay,  and  the  amounts. 

15.  July  5th.  We  owe  Arnold  Bros.  $2,654.25,  which  .is  for  an  invoice  purchased  June  26th, 
terms,  3/10 — n/30.  They  advise  that  if  we  will  accept  a  sixty-day  draft  for  such  an  amount,  that 
when  discounted  at  the  bank,  at  7%,  the  proceeds  will  equal  the  amount  of  this  invoice,  less  the 
discount,  they  will  credit  our  account  in  full.  We  have  agreed  to  do  this.  For  what  amount  should 
the  draft  be  drawn?    Make  the  required  journal  entry. 

16.  July  I,  191 1,  J.  H.  Appel,  J.  L.  Frazier  and  B.  N.  Bostwick  form  a  partnership  for  the  pur- 
pose of  engaging  in  contract  carpenter  work.  Each  invests  $200.00  in  the  business.  It  is  agreed 
that  each  partner  is  to  have  $4.00  per  day  for  all  the  time  which  he  works,  in  addition  to  his  share 
of  the  profits  from  the  business.  The  partners  are  to  invest  additional  funds  when  necessary  and  have 
the  privilege  of  withdrawing  any  part  of  this  extra  investment  when  desired,  in  addition  to  his 
wage  of  $4.00  per  day.     The  following  amounts  are  invested  and  withdrawn  by  the  partners: 

July  15th,  each  withdraws  $50.00;  July  23d,  J.  H.  Appel  invests  $75.00;  August  4th,  each  with- 
draws $50.00;  August  19th,  J.  L.  Frazier  invests  $60.00;  August  25th,  J.  H.  Appel  withdraws  $40.00; 
J.  L.  Frazier,  $35.00;  and  B.  N.  Bostwick,  $50.00;  September  5th,  each  withdraws  $50.00;  October 
1st,  B.  N.  Bostwick  invests  $100.00;  October  5th,  J.  H.  Appel  withdraws  $75.00;  October  20th,  each 
withdraws  $35.00;  November  ist,  they  pay  $110.55  for  extra  labor;  November  25th,  J.  H.  Appel 
invests  $75.00;  December  1st,  each  withdraws  $50.00;  December  15th,  each  withdraws  $25.00;  De- 
cember 20th,  B.  N.  Bostwick  withdraws  $60.00. 

January  ist,  they  desire  to  dissolve  the  partnership.  All  supplies  and  stock  on  hand  are  accepted 
by  J.  H.  Appel  at  the  present  value,  $115.75.  The  cash  on  hand  is  $1512.65.  J.  H.  Appel  has  worked 
132  days;  J.  L.  Frazier,  138  days;  and  B.  N.  Bostwick,  119  days.  What  amount  of  the  cash  on 
hand  would  be  paid  each  partner,  allowing  him  $4.00  per  day  for  his  time  as  per  agreement? 

17.  January  i,  1912,  W.  W.  Adams,  R.  C.  Rankin  and  J.  H.  Witt  form  a  partnership  for  the 
purpose  of  engaging  in  the  retail  grocery  business.  Each  partner  is  to  be  credited  with  his  invest- 
ment and  6%  interest  on  the  same,  also  charged  with  his  withdrawals  and  6%  interest  on 
the  same.     The  following  are  the  investments  and  withdrawals  of  each  partner: 

January  1st,  W.  W.  Adams  invests  $1000.00;  R.  C.  Rankin  invests  $1,200.00;  J.  H.  Witt  invests 
$850.00;  January  25th,  R.  C.  Rankin  withdraws  $350.00;  January  29th,  J.  H.  Witt  invests  $452.50; 
February  ist,  W.  W.  Adams  invests  $250.00;  February  25th,  the  firm  gives  C.  L.  Brownfield  a  check 
for  $298.75,  which  is  charged  to  W.  W.  Adams'  account;  March  5th,  R.  C.  Rankin  invests  $386.48; 
April  4th,  J.  H.  Witt  withdraws  $326.30;  May  i8th,  W.  W.  Adams  invests  $581.65;  June  1st,  R.  C. 
Rankin  invests  $452.89;  June  15th,  W.  W.  Adams  withdrew  $175.75;  July  5th,  J  H.  Witt  withdrew 
$150.00;  August  9th,  R.  C.  Rankin  invests  $190.00;  September  15th,  W.  W.  Adams  withdrew  $200.00; 
September  30th,  R.  C.  Rankin  withdrew  $165.50;  October  19th,  J.  H.  Witt  invests  $500.00;  Novem- 
ber 5th,  W.  W.  Adams  invests  $250.00;  November  27th,  R.  C.  Rankin  withdrew  $200.00. 

December  15th,  they  sell  the  business  to  the  Peoples'  Grocery  Company  for  $5,500.00  cash.  This 
is  to  be  divided  between  the  partners  according  to  contract.     What  amount  will  each  receive? 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  217 

PART  III. 

CORPORATION  BOOKKEEPING  AND  ACCOUNTING. 

JULY. 

Introducing  controlling  accounts,  special  accounts  with  selling  expense,  accounts  peculiar  to  a 
corporation,  the  principles  of  corporation  bookkeeping  and  accounting,  the  advantages  of  special 
ruling  in  all  books  of  original  entry,  the  notes  receivable  and  notes  payable  books  as  books  of  original 
entry,  and  many  other  features  of  advanced  bookkeeping  and  accounting. 

INTRODUCTION. 

"Correct  records  of  all  transactions  are  the  fundamental  basis  of  the  effective  economic  regula- 
tion of  the  affairs  of  every  person,  partnership,  corporation  and  government. 

"A  correct  tabulation  is  not  in  itself  a  correct  record.  A  record,  to  be  correct,  must  be  kept  in 
a  way  which  shows,  by  proper  grouping,  the  true  relation  between  every  factor  involved  in  the  cost 
of  living,  cost  of  distribution,  costs  of  doing  business,  and  in  the  final  statement,  showing  the  profit 
or  loss  for  the  fiscal  year,  or  for  a  period  of  years.  .  .  .  Just  judgments  are  rendered  only  when 
based  on  a  correct  knowledge  of  facts. 

"There  is  a  wide  difference  between  honest  accounting  and  scientific  accounting.  One  may  have 
a  record  that  will  honestly  account  for  every  dollar  received  and  expended,  without  having  a  record 
that  will  give  any  intelligent  information  regarding  the  true  relation  between  economic  factors  in- 
volved in  statements  of  costs  or  of  profits  or  losses.  The  records  of  all  accounts  should  be  intelligently 
grouped  to  show  the  economic  effect  of  every  factor  essential  to  the  true  statement  of  the  costs  or  of 
profits  or  losses.     Far  greater  harm  results  from  unintelligent,  than  from  dishonest,  accounting. 

"In  practical  affairs,  intelligent  accounting  is  the  rule,  dishonest  accounting  the  exception.    .    .    . 

"Charges  of  dishonesty  are  more  frequently  based  on  conclusions  drawn  from,  or  on  the  results 
of  a  policy  guided  by,  unintelligent  accounting,  than  upon  dishonest  entries  showing  receipts  or  dis- 
bursements. Scientific  accounting  safeguards  honesty.  It  prevents  dishonesty.  Losses  caused  by 
ignorance  are  enormously  greater  than  losses  caused  by  dishonesty.  .  .  .  Incompetent  account- 
ing is  the  cause  of  more  failures  than  all  other  causes  combined.  It  gives  incorrect  information  as  to 
costs  of  living,  products  and  services,  which  leads  to  the  acceptance  of  insufficient  compensation,  a 
course  that  must  result  in  failure  with  a  certainty  from  which  there  is  no  escape.  No  one  can  pay  three 
dollars  and  sell  for  two  dollars  without  impairing  his  capital.  If  he  makes  the  transaction  often 
enough,  his  entire  capital  will  be  exhausted;  his  failure  will  be  announced.  Incompetent  accounting 
is  the  cause  of  retarded  economic  development.  It  fails  to  show  where  economies  may  be  effected 
that  will  enhance  profits  or  give  advantages  in  meeting  competition.     .     .     . 

"There  can  be  no  effective  economic  regulation  without  scientific  accounting.  This  is  true  of 
all  regulation.  It  applies  with  equal  force  to  the  regulation  of  private  affairs  by  the  person  interested; 
to  the  regulation  of  partnership  affairs  by  the  partners  interested;  to  the  regulation  of  corporate 
affairs  by  the  shareholders  interested,  and  to  the  regulation  of  public  affairs  by  the  citizens  interested. 
There  can  be  no  scientific  accounting  without  a  grouping  of  items  that  will  correctly  show  the  rela- 
tion to  each  other  of  every  essential  economic  factor  in  all  statements  of  costs  of  living,  costs  of  prod- 
ucts, and  costs  of  services,  whether  rendered  by  a  public  service  corporation  or  by  the  Government." 
— Allen  Ripley  Foote,  President  of  the  International  Tax  Association  and  Commissioner  of  the 
Ohio  State  Board  of  Commerce. 

The  above  is  given  to  impress  upon  the  student's  mind  the  importance  of  a  correct  record  of 


2i8  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

business  transactions  and  the  correct  classification  of  accounts,  in  order  that  the  result  obtained  by 
this  record  may  show  the  true  condition  of  the  business.  We  want  the  student  who  completes  this 
course  to  go  into  the  business  world  with  confidence  in  his  ability  to  do  the  work  that  will  be  required 
of  him.  If  his  duties  are  to  record  transactions,  we  want  him  to  know  how  to  make  this  record  show 
correct  results,  so  that  no  accountant  will  ever  have  occasion  to  criticise  his  method  of  recording 
transactions,  or  that  he  may  not  unintentionally  make  such  a  record  that  he  will  be  guilty  of  innocent 
dishonesty.  The  principles  outlined  in  this  set  are  in  accordance  with  those  of  modern  bookkeepers 
and  accountants,  and  the  student  who  can  follow  the  instructions  given  and  get  the  desired  results 
need  not  fear  to  accept  a  position  in  any  office.  While  he  may  not  be  an  expert  bookkeeper,  yet  he 
will  have  the  proper  training  which  will  enable  him  to  become  an  expert. 

§  224.  Corporation.  A  corporation  is  defined  by  the  Supreme  Court  of  the  United  States 
as  "An  association  of  individuals  united  for  some  common  purpose,  and  permitted  by  the  law  to 
use  a  common  name,  and  to  change  its  members  without  dissolution  of  the  association."  This 
means  that  the  corporation  is  in  reality  an  artificial  person,  one  created  by  law.  When  created  and 
brought  into  existence  by  law,  it  has  the  same  privileges  as  any  citizen  governed  by  the  same  law. 

^  I .  Under  the  Common  Law,  two  or  more  persons  engaged  in  a  business  enterprise  (a  partner- 
ship) could  not  contract  in  the  firm  name,  but  only  in  the  name  of  each  individual.  While  this  has 
been  greatly  changed  by  the  state  statutes,  yet  a  partnership  is  subject  to  many  restrictions  in 
the  courts.  A  corporation  being  created  by  law  is  subject  to  the  laws  of  the  state  in  which  it  trans- 
acts business,  the  same  as  an  individual.  All  its  contracts  are  made  under  the  corporate  name,  and 
when  it  comes  into  court  it  is  known  only  by  its  name,  the  same  as  an  individual. 

A  corporation  differs  from  a  partnership  in  the  manner  of  organization,  method  of  conducting  the 
business,  responsibility  of  investors,  and  the  manner  of  dissolution.  It  agrees  in  the  object  for  which 
it  is  formed — the  combination  of  capital  for  the  mutual  benefit  of  those  interested. 

§  225.  Manner  of  Organization.  A  partnership  is  formed  by  contract.  A  corporation  is 
created  by  authority  of  the  laws  of  the  state  in  which  it  is  organized.  The  method  of  procedure  for 
organizing  a  corporation  differs  in  the  various  states.  In  the  following,  which  is  the  requirement 
of  the  state  of  New  York,  we  have  this  explanation:  "Except  as  provided  in  section  two-a  of  this 
chapter,  three  or  more  persons  may  become  a  stock  corporation  for  any  lawful  business  purpose  or 
purposes,  by  making,  signing,  acknowledging,  and  filing  a  certificate  which  shall  contain: 

\  I.     The  name    of   the    proposed    corporation. 

^  2,     The  purpose  or  purposes  for  which  it  is  to  be  formed. 

^  3.     The  amount  of  capital  stock,  and  if  any  portion  be  preferred  stock,  the  preferences  thereof. 

^  4.  The  number  of  shares  of  which  the  capital  stock  shall  consist,  the  value  of  which  shall 
not  be  less  than  five  nor  more  than  one  hundred  dollars,  and  the  amount  of  capital  not  less  than  five 
hundred  dollars,  with  which  the  said  corporation  will  begin  business. 

^  5.  The  city,  village  or  town  in  which  its  principal  business  office  is  to  be  located.  If  it  is 
to  be  located  in  the  city  of  New  York,  the  borough  therein  in  which  it  is  to  be  located. 

T[  6.     Its  duration. 

^  7.     The  number  of  its  directors,  not  less  than  three. 

^  8.     The  names  and  postoffice  addresses  of  the  directors  for  the  first  year. 

^  9.  The  names  and  postoffice  addresses  of  the  subscribers  to  the  subscription  list,  and  a  state- 
ment of  the  number  of  shares  of  stock  which  each  agrees  to  take  in  the  corporation." 

This  requirement  is  for  corporations  that  are  to  engage  in  a  mercantile  or  manufacturing  busi- 
ness, and  does  not  include  those  organized  to  engage  in  transportation,  banking,  education,  etc.,  nor 
those  for  charitable  purposes. 

The  certificate  must  be  signed  by  the  three  or  more  persons  who  make  application  for  the 
charter,  their  signature  acknowledged  by  a  Notary  Public  or  some  county  official,  and  this  cer- 
tificate recorded  by  the  proper  county  and  state  official. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  219 


§  226.  Method  of  Conducting  the  Business.  The  affairs  of  the  partnership  are  conducted 
by  the  partners  or  someone  designated  by  them.  If  it  is  conducted  by  the  partners  themselves, 
certain  duties  are  assigned  to  each,  these  being  outlined  in  the  agreement.  The  affairs  of  a  corporation 
are  in  charge  of  officers  who  are  elected  by  the  board  of  directors.  The  stockholders  (investors)  elect 
the  board  of  directors,  each  stockholder  voting  as  many  votes  as  he  holds  shares  of  stock.  As  a 
general  rule,  the  officers  are  elected  from  the  board  of  directors,  and  usually  consist  of  the  president, 
vice-president,  secretary  and  treasurer. 

§  227.  ResponsibiHty  of  Investors.  Each  partner  is  individually  responsible  for  all  the  debts 
of  a  partnership,  whether  contracted  by  him,  some  other  partner,  or  an  agent.  If  a  partnership 
becomes  insolvent,  the  creditors  can  collect  the  entire  amount  of  their  indebtedness  from  any  one 
partner  after  the  partnership  property  has  been  disposed  of.  A  stockholder  in  a  corporation  is  not 
individually  responsible  for  any  debts  contracted  by  the  corporation.  However,  if  the  corporation 
becomes  insolvent,  and  the  assets  do  not  pay  all  of  the  obHgations,  some  states  hold  each  stockholder 
individually  responsible  for  the  value  of  the  shares  which  he  owns;  other  states  relieve  him  of  this 
responsibility.  To  illustrate:  The  Consolidated  Manufacturing  Company  is  a  corporation  capi- 
taHzed  at  $50,000.00,  consisting  of  five  hundred  shares,  par  value  $100.00  each.  J.  C.  Mason  owns 
five  shares  of  this  stock.  The  corporation  becomes  insolvent,  and  after  all  of  the  property  has  been 
sold,  there  remains  an  indebtedness  of  $2,000.00.  The  creditors  could  collect  from  Mr.  Mason  five 
five-hundredths  of  this  amount,  this  being  in  proportion  to  the  number  of  shares  of  stock  that  he 
owns.  This  proposition  is  not  definite,  because  the  different  states  have  imposed  different  conditions, 
but  serves  to  illustrate  the  responsibility  of  a  stockholder  in  those  states  where  <^ach  stockholder  is 
held  individually  responsible  for  the  debts  of  the  corporation. 

§  228.  Manner  of  Dissolution.  A  partnership  continues  during  the  time  bpecified  in  the  con- 
tract, unless  dissolved  by  agreement,  by  decree  of  court,  by  the  death  of  a  partner,  or  by  the  disability 
of  a  partner.  During  the  existence  of  the  partnership,  neither  partner  has  a  right  to  sell  any  or  all  of 
his  interest  without  the  consent  of  the  others  interested.  Should  he  sell  under  protest,  this  dissolves 
the  partnership,  and  holds  him  individually  responsible  to  the  other  partners  for  any  damage  caused 
them  by  his  act.  A  corporation  continues  during  the  time  stated  in  the  charter.  The  death  or  legal 
disability  of  one  or  more  shareholders  does  not  affect  the  business  of  the  corporation.  Any  stockholder 
may  sell  his  stock  without  consulting  the  others  (unless  restricted  in  the  certificate  of  stock),  and  this 
transfer  does  not  in  any  way  affect  the  business  of  the  corporation.  When  transferred  on  the  books 
of  the  company  (and  the  secretary  must  transfer  all  stock  when  required  to  do  so  by  stockholders), 
the  new  owner  becomes  a  stockholder  with  the  same  rights  and  privileges  as  the  former  one.  In  other 
words,  the  interest  or  shares  in  a  corporation  are  considered  as  personal  property,  which  may  be 
sold  without  consulting  any  others  interested.  On  the  other  hand,  an  interest  in  a  partnership  is  a 
contract,  and  a  partner  can  not  dispose  of  it  unless  given  permission  by  the  other  partners. 

Since  the  acts  of  a  stockholder  have  no  effect  on  the  business  of  the  corporation,  and  the  charter 
may  be  renewed  any  number  of  times,  it  is  sometimes  said  that,  "A  corporation  never  dies." 

§  229.  Object  of  Organization.  A  partnership  and  a  corporation  are  both  organized  for  a 
speculative  purpose.  Generally,  no  person  cares  to  assume  all  the  responsibility  of  a  new  enterprise, 
hence  combines  his  capital  with  that  of  others,  thus  distributing  the  loss  or  gain  that  may  arise  from 
the  investment.  As  a  general  rule,  a  partnership  is  formed  when  the  amount  of  the  investment  is 
secured,  and  each  one  of  the  investors  is  taking  active  part  in  the  business.  When  a  large  amount  of 
capital  is  required,  a  corporation  is  formed  and  the  necessary  funds  are  collected  by  selling  the  stock. 
The  business  is  conducted  by  a  board  of  directors  elected  by  the  stockholders,  each  stockholder  being 
'  entitled  to  as  many  votes  as  the  number  of  shares  he  holds.  A  corporation  offers  an  opportunity 
for  investment  of  small  amounts  by  those  who  are  not  in  a  position  to  take  active  interest  in  the 
business.  While  the  same  organization  could  be  effected  by  a  partnership,  yet  each  investor  would 
be  responsible  for  the  debts  created  by  the  partners  who  had  actual  charge  of  the  business,  which 
would  not  be  satisfactorv. 


220  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


TERMS  PECULIAR  TO  A  CORPORATION. 

§  230.  Charter.  The  charter  is  a  written  document  setting  forth  the  facts  required  by  the 
law,  and  is  the  corporation's  authority  for  doing  business.  It  gives  the  name  of  the  corporation,  the 
amount  of  the  capital  stock,  location,  place  of  business,  nature  of  the  business,  time  of  existence, 
and  such  other  information  as  is  required  by  the  state  law  under  which  it  is  granted.  It  must  be 
signed  by  the  required  number  of  charter  members;  i.  e.,  the  persons  who  make  application  for  the 
charter.  The  number  of  charter  members  necessary  to  organize  a  corporation  is  governed  by  the 
state  law,  but  is  usually  not  less  than  three. 

§  231.  Capital  Stock.  The  capital  stock  is  the  total  stock  (face  value)  issued  and  outstand- 
ing. The  capital  stock  mentioned  in  the  charter  is  the  amount  of  stock  that  can  be  issued,  but  it  is 
not  necessary  to  issue  all  of  this  unless  required  by  state  law.  The  capital  stock  is  represented  by 
a  specified  number  of  shares  of  equal  value.  This  value  is  fixed  by  the  charter  members,  and  must 
be  stated  in  the  charter.  It  may  be  one  dollar,  five  dollars,  ten  dollars,  fifty  dollars,  one  hundred 
dollars,  or  any  other  amount  that  may  be  selected  by  the  charter  members,  unless  the  state  law 
governs  the  minimum  or  maximum  value  of  each  share.  As  stated,  it  is  not  necessary  for  all  of  the 
shares  designated  in  the  charter  to  be  sold  and  paid  for  before  the  corporation  begins  business. 
The  minimum  number  of  shares  to  be  issued  is  usually  designated  by  the  law  that  creates  the  cor- 
poration, as  it  would  not  be  good  policy  to  permit  a  corporation  to  begin  doing  business  that  had  no 
capital.  A  corporation  that  has  a  capital  stock  of  $100,000.00,  with  par  value  of  $100.00  per  share, 
would  consist  of  one  thousand  shares.  A  corporation  that  has  a  capital  stock  of  $1,000,000.00,  with 
par  value  of  $25.00  per  share,  would  consist  of  forty  thousand  shares. 

§  232.  Capital.  The  capital  of  a  corporation  or  any  business  is  the  net  value  of  its  assets, 
after  all  the  liabilities  have  been  paid.  The  capital  stock  is  the  par  value  of  the  stock  issued,  and  may 
be  more  or  less  than  the  capital,  depending  upon  the  net  value  of  the  assets.  The  greater  the  excess  in 
value  of  the  capital  over  the  capital  stock,  the  greater  the  value  of  each  share ;  thus,  if  a  corporation 
with  a  capital  stock  of  $100,000.00  has  a  capital  (net  assets)  worth  $200,000.00,  then  each  share 
would  be  worth  double  the  par  value.  On  the  other  hand,  if  the  capital  (net  assets)  is  only  $90,000.00, 
each  share  would  be  worth  only  90c  on  the  dollar. 

The  student  must  not  confuse  the  capital  with  the  capital  stock.  He  must  keep  in  mind  the  fact 
that  the  capital  stock  is  the  par  value  of  the  shares  issued,  and  the  capital  is  the  net  worth  of  the  busi- 
ness. The  value  of  the  capital  stock  is  shown  by  the  Capital  Stock  account,  which  is  the  par  value 
of  all  the  shares  issued.  The  value  of  the  capital  is  represented  by  the  Capital  Stock  account  and 
Surplus  account.    This  will  be  shown  by  these  two  accounts  only  at  the  beginning  of  each  fiscal  period. 

§  233.  Certificate  of  Stock.  The  certificate  of  stock  is  a  printed  form  which  is  the  stock- 
holder's receipt  for  the  money  he  has  invested.  It  states  the  number  of  shares  for  which  he 
has  paid,  and  the  value  of  each,  and  is  signed  by  the  legally  authorized  officers,  which  are  usually  the 
president  and  secretary.  The  par  value  of  each  share  and  number  of  shares  is  shown  in  the  certifi- 
cate. The  real  value  of  the  stock  certificate  will  depend  upon  the  dividends  paid  and  the  value  of 
the  capital. 

Stock  certificates  are  bound  in  book  form,  each  provided  with  a  stub.  When  a  certificate  is  is- 
sued, the  same  facts  are  shown  on  the  stub  for  reference.  When  the  certificate  is  sold  by  the  stock- 
holder to  whom  it  is  issued,  and  a  new  stockholder  has  it  transferred  on  the  books,  these  facts  are 
shown  on  the  stub  of  the  original  certificate,  also  on  the  stub  of  the  new  certificate  issued  to  the  new 
stockholder.  The  certificate  stubs  are  numbered  consecutively,  and  the  account  kept  with  each  stock- 
holder in  the  stock  ledger  should  show  the  number  of  the  stock  certificates  which  he  owns.  If  a  stock- 
holder owns  more  than  one  certificate,  his  account  in  the  stock  ledger  should  show  the  number  and 
value  of  each  in  a  separate  entry. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  221 

§  234.  Stockholder.  A  stockholder  in  a  corporation  is  one  who  owns  stock  in  the  corpora- 
tion. As  evidence  of  this  ownership,  he  holds  one  or  more  certificates  which  show  the  number  of  shares 
he  owns.  It  is  not  necessary  (unless  provided  by  state  law)  for  the  certificate  to  be  recorded  on  the 
books  of  the  corporation,  but  if  the  stockholder  wishes  to  enjoy  the  privileges  granted  a  stockholder, 
he  must  have  his  certificate  registered  so  that  the  officers  of  the  corporation  will  know  who  owns  the 
various  shares  of  stock.  This  information  is  especially  necessary  at  the  time  a  dividend  is  declared. 
A  stockholder  does  not  own  any  part  of  the  assets  of  the  corporation,  but  shares  with  the  other 
stockholders  in  the  distribution  of  these  assets  when  the  corporation  is  dissolved.  If  he  wishes  to  dispose 
of  his  interest  before  dissolution,  he  can  do  so  by  selling  his  stock.  The  corporation  is,  itself,  a  legal 
entity,  and  the  ownership  of  the  business  vests  in  it.  and  not  in  the  stockholders. 

There  are  two  kinds  of  stock  issued  by  corporations:  common  stock,  and  preferred  stock. 

§  235.  Common  Stock.  All  stock  issued  by  a  corporation  is  common  stock  unless  otherwise 
designated.  The  owners  of  common  stock  share  in  the  profits  of  the  corporation  in  proportion  to  the 
number  of  shares  they  own.  Thus,  if  a  person  owns  one  hundred  shares  in  a  corporation  of 
one  thousand  shares,  he  will  be  entitled  to  one-tenth  of  the  profits  set  aside  by  the  board  of  directors 
for  distribution.  He  receives  the  same  proportionate  part  of  the  profit  as  the  other  stockholders, 
and  does  not  enjoy  any  special  privileges. 

§  236.  Preferred  Stock.  Preferred  stock  is  issued  with  a  contract  that  a  fixed  per  cent  will 
be  paid  out  of  the  profit  as  a  dividend,  and  this  is  paid  before  the  holders  of  common  stock  receive 
any  dividend.  In  case  the  profit  is  not  sufficient  to  pay  this  dividend,  the  directors  may  declare 
only  a  part  of  it,  but  the  claim  of  the  preferred  stockholders  for  the  remainder  of  the  dividend  not 
declared,  cumulates  and  the  full  amount  of  these  cumulated  dividends  must  be  paid  before  any  divi- 
dends are  paid  to  the  holders  of  common  stock.  Non -cumulative  preferred  stock  may  be  issued,  in 
which  case  preferred  stockholders  would  receive  only  that  part  of  the  fixed  dividend  which  was  earned, 
and  if,  at  any  time,  they  fall  short  of  the  full  amount  of  the  preferential  dividend,  the  amount  not  paid 
is  a  loss  to  them. 

T[  I.  The  Value  of  Any  Stock  depends  upon  the  dividends  paid ;  hence,  it  is  possible  for  the  common 
stock  to  become  more  valuable  than  the  preferred  stock.  If  there  is  a  large  profit,  and  the  amount 
set  aside  by  the  board  of  directors  as  a  dividend  pays  the  preferred  stockholders  their  fixed  dividend, 
and  the  common  stockholders  a  larger  dividend  than  this,  the  common  stock  becomes  more  valuable. 
At  the  beginning  of  the  business,  the  preferred  stock  offers  the  more  attractive  investment,  because 
the  amount  of  dividend  is  fixed  and  the  purchaser  knows  that  he  is  going  to  receive  a  certain  per  cent 
on  the  money  invested. 

The  two  classes  of  stock  are  issued  by  authority  of  the  law  which  creates  the  corporation,  and 
is  subject  to  the  conditions  imposed  by  the  laws  of  the  state  under  which  it  is  organized.  The  above 
explanation  is  given  to  show  the  difference  between  the  two  kinds  of  stock  issued  by  a  corporation, 
and  can  not  be  accepted  as  absolute  in  every  state  on  account  of  the  special  state  laws. 

§  237.  Dividend.  The  dividend  is  that  part  of  the  profit  which  is  distributed  among  the  stock- 
holders. As  a  general  rule,  all  of  the  profit  is  not  distributed,  because  it  might  impair  the  working 
capital.  When  the  statement  of  the  business  is  made  at  the  close  of  the  fiscal  period,  the  amount  of 
property  to  be  distributed  is  designated,  and  this  is  distributed  among  the  stockholders.  As  ex- 
plained in  §  235  and  §  236,  this  dividend  is  divided  among  the  stockholders,  according  to  the  kind 
of  stock  they  hold.  If  all  the  stock  is  common,  then  the  dividend  is  divided  equally  among  the  stock- 
holders, in  proportion  to  the  value  of  stock  each  holds.  If  any  stock  is  preferred,  the  amount  of  the 
fixed  dividend  to  be  paid  preferred  stockholders  is  paid  to  them,  and  the  remainder  is  distributed  among 
the  common  stockholders. 


222  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

§  238.  Assessment.  When  the  business  has  been  conducted  at  a  loss,  it  is  sometimes  neces- 
sary to  secure  additional  funds  to  carry  on  the  business.  This  is  done  by  levying  on  each  stockholder. 
This  is  the  reverse  of  a  dividend,  but  is  paid  in  the  same  proportion,  that  is,  each  stockholder  pays 
the  proportionate  part  of  the  assessment  according  to  the  number  of  shares  which  he  owns.  Assess- 
ments are  levied  by  authority  of  the  board  of  directors.  As  stated,  each  stockholder  pays  his  part 
unless  he  holds  stock  that  is  non-assessable.  This  class  of  stock  is  sometimes  issued  in  order  to  insure 
the  stockholder  that  he  will  not  have  to  pay  out  money  to  support  the  business. 

§  239.  Surplus  Fund.  The  amount  of  dividends  is  usually  determined  by  the  board  of  di- 
rectors. It  is  not  the  best  policy  to  pay  out  all  the  profit  in  dividends.  However,  the  conditions  under 
which  the  corporation  is  working  will  determine  this.  If  any  part  of  the  profit  is  not  distributed, 
it  is  carried  as  a  surplus  fund,  and  an  account  must  be  kept  with  this.  The  Surplus  account  may  also 
be  used  for  other  purposes,  as  will  be  explained  later. 

§  240.  Bonds.  A  bond  is  a  long  time  note,  arranged  in  a  special  form.  They  are  usually  is- 
sued in  denominations  of  one  hundred,  five  hundred  or  one  thousand  dollars,  and  secured  by  a  mort- 
gage on  real  estate  or  personal  property,  which  is  held  in  trust  by  a  trustee.  Bonds  are  issued  by  cor- 
porations to  secure  capital  with  which  to  operate  the  business.  Bonds  may  also  be  issued  by  a  public 
corporation,  in  which  case,  they  are  secured  by  the  assets  of  the  corporation. 

§  241.  Sinking  Fund.  This  is  a  special  fund  created  with  the  view  of  providing  money  with 
which  to  pay  bonds  when  they  fall  due.  If  a  corporation  issues  bonds  for  twenty  thousand  dollars, 
which  are  payable  in  ten  years,  they  should  provide  a  sinking  fund,  and  at  the  end  of  each  year  take 
two  thousand  dollars  from  the  profits  and  set  it  aside  as  a  sinking  fund,  so  that  when  the  bonds 
fall  due  they  will  have  the  money  to  pay  them.  The  amount  set  aside  as  a  sinking  fund  should  be  taken 
from  the  profits  of  the  corporation,  and  considered  as  a  separate  asset. 

§  242.  Treasury  Stock.  Treasury  stock  is  capital  stock  of  a  corporation  that  has  been  is- 
sued and  afterwards  acquired  by  the  corporation.  A  corporation  has  the  right  to  purchase  its  own 
capital  stock,  unless  the  state  law  under  which  it  is  organized  forbids  this.  If  for  any  reason  the  cor- 
poration does  purchase  its  own  stock,  this  becomes  an  asset,  and  is  held  in  the  treasury  until  disposed 
of.  Unissued  stock  is  not  treasury  stock,  though  sometimes  it  is  erroneously  considered  as  such.  No 
matter  what  amount  of  capital  stock  is  stated  in  the  charter,  its  capital  stock  is  the  par  value  of  the 
stock  sold  and  issued.  Stock  that  is  not  issued  can  not  be  an  asset  of  the  corporation,  because  it  has 
no  real  value.  The  fact  that  all  the  stock  authorized  by  the  charter  has  not  been  issued,  does  not 
enable  the  corporation  to  call  this  unissued  stock  an  asset,  and  it  should  never  be  considered  as  such. 
Treasury  stock  is  illustrated  by  the  following:  A  corporation  organized  for  the  purpose  of  conducting 
a  wholesale  grocery  business  requires  each  employee  to  purchase  stock,  with  the  understanding,  that 
if  at  any  time  he  wishes  to  discontinue  his  services,  this  stock  will  be  purchased  from  him.  An  employee 
who  holds  five  shares  hands  in  his  resignation ;  the  corporation  pays  him  his  salary,  also  pays  him  for 
his  stock  as  per  agreement.  This  stock  is  held  in  the  treasury  to  be  disposed  of  to  the  employee  who 
takes  his  place  or  to  any  other  person  who  wishes  to  purchase  it. 

§  243.  Changing  from  a  Partnership  to  a  Corporation.  When  it  is  desired  to  incorporate 
a  business  that  has  been  conducted  as  a  partnership,  it  is  necessary  to  close  the  books.  As  a  general 
rule,  this  change  is  made  at  the  regular  closing  time,  which  would  be  the  close  of  the  fiscal  period. 
After  the  statements  of  the  business  have  been  made,  the  books  closed  and  the  charter  obtained, 
stock  is  issued  to  the  partners  as  per  agreement.  If,  for  any  reason,  the  partners  are  given  stock, 
the  par  value  of  which  is  more  than  the  net  capital,  this  excess  being  considered  the  good  will  of  the 
business,  it  must  be  represented  by  a  Good  Will  account.  The  entries  required  for  making  the  change 
depend  entirely  upon  the  conditions  under  which  the  stock  is  issued.  The  Capital  account  of  each 
partner  must  be  closed,  and  the  capital  of  the  corporation  shown  in  the  Capital  Stock  account. 
The  student  will  better  understand  the  method  of  making  the  change  after  he  has  made  the  entry 
required  at  the  beginning  of  this  set. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


223 


QUESTIONS. 


8. 


10. 


II. 


12. 


Define  a  corporation.     (§  224.)  13. 
Under  the  common  law  how  could  part- 
ners  contract?      (If  i.)                                       -    14. 
To  what  extent   has  state   laws  changed 

this?      a  I.)  15. 

Distinguish    between    a    partnership    and  16. 

a  corporation.  17. 
Describe     the     manner    of    organizing    a 

corporation.     (§  225.)  18. 

How  many  persons  does  the  law  require  19. 

for  the   formation   of  a  corporation? 

Name    some    of   the    conditions    that    are  20. 

usually    included    in    a    certificate    of  21. 

corporation.     (^^  i — 9.)  22. 

How  are  the  afTairs  of  a  partnership  con-  23. 

ducted?      A    corporation?      (§  226.) 

To  what  extent  is  each   partner  person-  24. 

ally    responsible    for    the    debts    of    a 

partnership?     (§  227.)  25. 

To  what  extent  is  each  stockholder  in  a  26. 

corporation    personally    responsible    for  27. 

the   debts   of   a  corporation?      (§  227.)  28. 

How  is  a  partnership  dissolved?     A  cor-  29. 

poration?     (§  228.)  30. 
Why  is  it  often  said  that  "A  corporation 

never  dies?"     (§  228.) 


What  is  the  object  of  a  partnership?     A 

corporation?     (§  229.) 
Define     the     charter    of     a     corporation. 

(§  230.) 
What   is  the   capital   stock?      (§  231.) 
What  is  the  capital?     (§  232.) 
When  are  the  capital  and  the  capital  stock 

the  same? 
What  is  a  certificate  of  stock?     (§  233.) 
Who  is   a   stockholder  in   a  corporation? 

(§  234-) 
Define  common   stock.      (§  235.) 

Define    preferred    stock.      (§  236.) 

Which    is    the    better   investment? 

What  is  a  dividend  as  applied  to  a  cor- 
poration?    (§  237.) 

What  is  an  assessment  as  applied  to  a 
corporation?     (§  238.) 

Which  is  preferable?     Why? 

Define    surplus    fund.      (§  239.) 

Define  a  bond.      (§  240.) 

Define   sinking   fund.      (§  241.) 

Define  treasury  stock.      (§  242.) 

Describe  the  method  of  changing  the 
books  of  a  partnership  to  a  corpora- 
tion.    (§  243.) 


ACCOUNTS  PECULIAR  TO  A  CORPORATION. 

§  244.  With  Few  Exceptions,  the  same  accounts  kept  in  a  partnership  will  be  kept  in  a  cor- 
poration. The  only  real  difference  between  the  two,  aside  from  the  nature  of  the  business,  is  the  manner 
of  keeping  the  account  with  the  investment,  and  the  distribution  of  the  profits.  Capital  Stock,  Sur- 
plus Fund,  Dividend,  and  Treasury  Stock  are  the  principal  accounts  required. 

CAPITAL  STOCK  ACCOUNT. 

§  245.  The  Object  of  this  Account  is  to  show  the  investment.  It  represents  the  same  in  the 
corporation  as  the  Capital  account  of  the  partners  does  in  a  partnership.  The  only  difference  is  that 
no  part  of  the  profit  is  closed  into  this  account,  unless  additional  stock  is  issued  for  it.  If  both  common 
and  preferred  stock  are  issued,  it  is  necessary  to  keep  two  capital  stock  accounts,  one  with  the  former 
and  the  other  with  the  latter.    Each  would  be  debited  and  credited  the  same. 


Debit   the   Capital   Stock   Account: 
^  I.     With  the  par  value  of  stock  retired. 


Credit   the    Capital   Stock   Account: 

*jf  2.     With  the  par  value  of  stock  issued  and 
sold. 


224 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^3.  The  Balance  of  this  Account  should  represent  the  capital  stock  of  the  corporation,  which  is 
the  par  value  of  stock  issued  and  outstanding.  It  appears  on  the  Financial  statement,  as  one  of  the 
liabilities  of  the  corporation,  after  all  other  obligations  have  been  listed. 

^  4.  To  Close  the  Capital  Stock  Account.  This  account  is  not  closed  unless  it  is  desired  to  bring 
the  balance  down  or  transfer  it  to  a  new  page.  It  is  ruled  with  single  and  double  red  lines,  footed 
with  black  ink,  and  the  balance  entered  in  black  ink  on  the  credit  side  below  the  ruled  lines  or  on  a 
new  page. 


^~~7^^^ 


/ 
/ 


A^  ^  (^  i?  ^ 
/  ^  iP  £> 
if  ^  i?  iP 


Illustration  No.  94.     Capital  Stock  Account. 

SURPLUS  ACCOUNT. 

§  246.  The  Object  of  this  Account  is  to  show  the  amount  of  undivided  profit,  the  amount 
of  the  loss,  and  the  adjustment  for  any  special  profits  or  losses  that  may  occur. 

In  a  partnership,  the  profit  or  loss  is  closed  into  each  of  the  partner's  Capital  or  Personal  accounts. 
In  a  corporation,  the  profit  is  not  closed  into  the  Capital  Stock  account,  but  that  part  to  be  distributed 
as  a  dividend  is  closed  into  the  Dividend  account,  and  the  balance  of  undivided  profits  is  closed  into  the 
Surplus  account.  If  desired,  a  special  account  may  be  kept  with  Undivided  Profits,  in  which 
case  the  Surplus  account  would  only  take  care  of  the  special  entries  required  in  adjusting  profits  or 
losses  that  occur  during  the  fiscal  period. 


Dehit  the  Surplus  Account: 

Tf  I.     With   any   adjustment  during  the   fiscal  T[  4. 

period,  which  diminishes  the  profit  of 
the  preceding  period. 

^  2.     With   any   special   loss   that   may   occur  *|  5. 

during   the   current   fiscal    period. 

^3.     At  the  close  of  each  fiscal  period  with  \  6. 

the  net  loss  as  shown  by  the  debit  bal- 
ance of  the  Profit  and   Loss  account. 


Credit  the  Surplus  Account: 

With  any  adjustment  during  the  fiscal 
period,  which  increases  the  profit  of 
the  preceding  period. 

With  any  special  profit  that  may  occur 
during  the  current  fiscal  period. 

At  the  close  of  each  fiscal  period  with 
that  part  of  the  profit  which  is  not  to 
be  divided  among  the  stockholders. 


^  7.  The  Balance  of  this  Account,  at  the  close  of  the  fiscal  period,  represents  the  undivid- 
ed profits  unless  a  special  account  is  kept  with  Undivided  Profits,  in  which  case  the  balance  would 
represent  the  special  losses  or  gains  that  occurred  during  the  fiscal  period.  It  appears  on  both  the  Fi- 
nancial, and  Profit  and  Loss  statements,  and  is  used  in  closing  each.  The  difference  between  the 
total  resources  and  total  liabilities  is  the  total  undivided  profits.  The  difference  between  this  and  the 
surplus,  or  undivided  profits  of  the  preceding  fiscal  period  or  periods,  is  the  profit  for  the  current 
fiscal  period. 


20tH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


225 


^  8.  To  Close  the  Surplus  Account.  This  account  is  not  closed  unless  it  balances,  or  the  balance 
is  brought  down  on  the  same  page,  or  transferred  to  a  new  page.  If  it  balances,  it  is  ruled  with  single 
and  double  red  lines  and  the  totals  entered  in  black  ink.  If  it  is  made  to  balance,  the  difference  is 
entered  on  the  smaller  side  in  red  ink,  the  account  ruled  with  single  and  double  red  lines,  footed  in 
black  ink  and  the  balance  entered  in  black  ink  on  the  opposite  side  from  the  red  ink  entry,  either  on 
the  same  page  or  a  new  page. 


Illustration  No.  95.     Surplus  Account. 
DIVIDEND  ACCOUNT. 


§  247.  Tne  Object  of  this  Account  is  to  show  the  amount  of  profit  divided  among  the  stock- 
holders. After  the  Financial,  and  Profit  and  Loss  statements  have  been  made,  and  the  books  closed, 
the  Surplus  account  shows  the  amount  of  undivided  profit.  The  board  of  directors  then  decide  upon 
the  amount  of  profit  to  be  divided  among  the  stockholders.  This  is  usually  some  per  cent  of  the  par 
value  of  the  stock.  A  dividend  of  5  per  cent  would  mean  $5.00  on  each  share,  if  the  par  value  of  a  share 
was  $100.00;  a  dividend  of  10  per  cent  would  mean  $2.50  on  each  share,  if  the  par  value  of  the  stock 
was  $25,00.  A  separate  account  should  be  opened  for  each  dividend  and  designated  by  number. 
Thus,  Dividend  No.  i,  represents  the  first;  Dividend  No.  2,  the  second,  etc. 


Debit  the  Dividend  Account: 


Credit  the  Dividend  Account: 


^  I.     For  dividends  paid. 


^  2.  For  the  amount  of  the  dividend  declared 
by  the  board  of  directors  for  which  the 
Surplus  account  is  debited. 


\  3.  The  Difference  between  the  two  sides  of  this  Account  is  the  amount  of  dividends  not  paid. 
As  a  general  rule,  the  dividend  checks  are  issued  for  all  dividends  paid  at  the  time  they  are  declared 
by  the  board  of  directors,  in  which  case,  this  account  will  balance  because  it  is  credited  with  the 
total  amount  of  the  dividend  and  charged  with  the  dividend  checks.  If,  for  any  reason,  some  of 
the  stockholders  do  not  receive  their  dividend  checks,  the  balance  of  this  account  will  show  the 
amount  of  dividend  yet  to  be  distributed. 

^4.  To  Close  the  Dividend  Account.  This  account  is  closed  when  it  balances,  which  will  be 
after  all  the  dividend  set  apart  to  be  divided  among  the  stockholders  has  been  paid.  As  explained, 
this  is  usually  done  at  once,  hence  the  account  is  opened  and  closed  at  practically  the  same  time 
and  remains  closed  until  the  end  of  the  next  fiscal  period. 


226 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^:?<!!lii^?^^?^^^^<^i^,i^^^ 


Ct^/: 


y^/ 


.^ 


/  ;z  ^j^' 


/^/ 


^y^tx-i!^ 


J^ 


^> 


/  ^   ^^' 


Illustration  No.  96.     Dividend  Account. 

TREASURY  STOCK  ACCOUNT. 

§  248.  The  Object  of  this  Account  is  to  show  the  value  of  its  own  stock  purchased  by  the  cor- 
poration. This  account  is  not  opened  unless  the  corporation  purchases  its  own  stock  or  this  is  donated 
by  some  stockholder  to  the  corporation,  and  should  never  represent  any  part  of  the  capital  stock  which 
has  not  been  issued. 


Credit  the   Treasury  Stock  Account: 

For  the  par  value  of  treasury  stock  sold. 
If  it  is  sold  above  par,  the  difference 
is  credited  to  the  Surplus  account. 


Debit    the    Treasury    Stock    Account: 

\  I.     For  the  par  value  of  its  own  stock  pur-  ^  3. 

chased   by   the   corporation. 

^  2.  For  the  par  value  of  stock  donated  to 
the  treasury  by  a  stockholder.  If  the 
value  of  this  is  below  par  this  differ- 
ence should  be  shown  by  a  special 
account. 

^4.  The  Balance  of  this  Account  shows  the  par  value  of  its  own  stock  held  in  the  treasury  of 
the  corporation.  It  is  an  asset  and  must  appear  on  the  Financial  statement  after  all  the  active  resources 
and  fixed  investments  have  been  listed.  If,  for  any  reason,  the  treasury  stock  is  not  worth  par  value, 
this  discrepancy  must  be  deducted  from  the  value  of  the  asset  and  shown  in  a  negative  account. 

^5.  To  Close  the  Treasury  Stock  Account.  This  account  is  not  closed  until  all  of  the  stock  has 
been  sold,  unless  it  is  desired  to  balance  the  account.  If  all  the  stock  has  been  sold,  the  account  is 
ruled  with  single  and  double  red  lines  and  footed  in  black  ink.  If  it  is  made  to  balance,  the  balance  is 
entered  on  the  credit  side  in  red  ink,  the  account  ruled  with  single  and  double  red  lines,  footed  in  black 
ink,  and  the  balance  brought  down  on  the  debit  side,  or  transferred  to  a  new  page  in  black  ink. 

NOTE — Many  states  do  not  permit  a  corporation  to  purchase  its  own  stock.  If  for  any  reason  it  becomes  neces- 
sary for  the  corporation  to  do  this,  such  stock  must  be  disposed  of  within  a  limited  time.  The  above  explanation  of  the 
treasury  stock  and  Treasury  Stock  account  is  given  subject  to  the  laws  of  the  various  states.  There  are  also  other  methods 
of  keeping  the  Treasury  Stock  account.    The  one  described  is  considered  best  practice  by  leading  accountants. 

OTHER  ACCOUNTS  INTRODUCED  IN  JULY. 

§  249.  Controlling  Accounts.  The  object  of  a  controlling  account  is  to  show,  in  total,  the 
facts  shown  on  a  subsidiary  ledger.  It  is  kept  in  the  general  ledger,  and  may  represent  a  ledger  in 
which  accounts  are  kept  with  creditors,  customers,  consignments,  shipments,  etc.  It  is  best  to  keep 
a  controlling  account  with  each  subsidiary  ledger,  but  one  controlling  account  may  represent  two  or 
more  ledgers  if  desired.  It  is  necessary  to  have  a  special  column  in  each  book  of  original  entry  for 
each  controlling  account.  If  there  is  only  an  occasional  entry  in  any  book  that  belongs  to  the  con- 
trolling account,  it  is  not  necessary  to  have  a  special  column,  but  each  entry  may  be  posted  twice, 
first  to  the  subsidiary  ledger,  and  second  to  the  controlling  account.  The  accounts  in  the  sub- 
sidiary ledger  are  debited  or  credited  with  the  various  amounts  entered  in  these  columns,  and  the 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


227 


controlling  account  debited  or  credited  with  the  total  of  each  column  at  the  end  of  the  month.  Con- 
trolling accounts  are  essential  in  modern  accounting,  and  offer  many  advantages.  One  of  the  chief 
advantages  is  the  time  saved  in  taking  the  Trial  Balance.  This  is  taken  from  the  general  ledger,  and 
when  that  ledger  is  proved  to  be  in  balance,  each  subsidiary  ledger  is  proved  by  the  controlling  ac- 
count in  the  general  ledger.  This  permits  the  Trial  Balance  to  be  taken  in  parts,  and  is  a  great  as- 
sistance if  an  error  is  made,  and  it  is  necessary  to  check  the  posting.  To  illustrate:  The  bookkeeper 
has  on  his  ledger  twelve  hundred  open  accounts;  one  hundred  of  these  are  in  the  general  ledger; 
two  hundred  in  the  purchases  ledger,  and  nine  hundred  in  the  sales  ledger.  He  has  one  controlling 
account  in  his  general  ledger  with  Purchases  Ledger  and  another  account  with  Sales  Ledger.  When 
he  takes  his  general  Trial  Balance,  there  is  an  error  of  ten  cents.  To  discover  this,  it  is  necessary  it 
check  the  posting  to  the  general  ledger.  After  this  error  is  discovered,  he  proves  the  purchases  ledger. 
This  is  done  by  ascertaining  that  the  total  of  the  balances  due  creditors  is  the  same  as  the  difference 
of  the  Purchases  Ledger  account  in  the  general  ledger.  He  proves  the  sales  ledger  to  be  correct  in 
the  same  manner,  comparing  the  total  of  the  balances  due  from  customers  with  the  balance  of  the 
Sales  Ledger  account.  He  then  knows  that  all  of  his  work  is  correct.  If  he  had  not  used  the  con- 
trolling accounts,  it  would  have  been  necessary  to  check  the  posting  to  all  three  of  the  ledgers  in  order 
to  discover  the  ten  cents  error,  that  is,  if  it  was  not  discovered  before  the  checking  was  completed. 

PURCHASES  LEDGER  ACCOUNT. 

§  250.  The  Object  of  this  Account  is  to  keep  a  record,  in  total,  of  the  amounts  due  cred- 
itors as  shown  by  the  various  accounts  in  the  purchases  ledger.  It  is  a  controlling  account  (§  249). 
and  is  kept  in  the  general  ledger. 


Debit    the    Purchases    Ledger    Account: 


Credit    the    Purchases    Ledger    Account: 


\  I.  For  the  total  of  the  purchases  ledger 
column  on  the  credit  side  of  the  cash 
book,  at  the  end  of  the  month. 

^  2.  For  the  total  of  the  purchases  ledger  column 
in  the  journal,  at  the  end  of  the  month. 

^  3.  For  the  total  of  the  purchases  ledger 
column  in  the  notes  payable  book,  at 
the  end  of  the  month,  if  this  book 
is  used  as  a  book  of  original  entry. 


^  4.  With  the  total  purchases  as  shown  by 
the  purchases  book.  If  more  than  one 
account  is  kept  with  merchandise  on 
account  of  different  departments,  the 
Purchases  Ledger  account  is  credited 
with  the  same  amount  as  the  various 
departments  are  debited,  which  is  the 
same  as  the  total  purchases  shown  by 
the  purchases  book. 


^5.  The  Balance  of  this  Account  shows  the  amount  due  creditors.  If  the  general  Trial  Bal- 
ance is  in  balance,  this  difference  must  be  correct.  The  purchases  ledger  is  proved  by  adding  the 
various  amounts  due  creditors,  which  must  be  the  same  as  the  difference  of  the  Purchases  Ledger  ac- 
count. This  difference  is  a  liability,  and  appears  as  one  of  the  liabilities  on  the  Financial  state- 
ment, in  the  same  manner  as  individual  personal  accounts. 

T[6.  To  Close  the  Purchases  Ledger  Account.  This  account  is  not  closed  until  it  balances,  un- 
less it  is  desired  to  make  the  account  balance.  If  it  balances,  it  is  ruled  with  single  and  double  red 
lines  and  footed  in  black  ink.  If  it  is  made  to  balance,  the  difference  is  entered  on  the  debit  side  in 
red  ink,  the  account  ruled  with  single  and  double  red  lines,  footed  in  black  ink,  and  the  balance 
brought  down  on  the  same  page,  or  transferred  to  a  new  page  on  the  credit  side  in  black  ink. 

NOTE — Some  bookkeepers  prefer  ruling  this  account  at  the  end  of  each  month  because  the  balance  represents  the 
total  of  the  various  balances  shown  in  the  purchases  ledger.  This  is  very  good  practice,  especially  where  there  are  a  num- 
ber of  debits  and  credits  during  the  month.  If  the  account  is  closed  at  the  end  of  the  month,  the  balance  should  not  be 
brought  down  until  after  the  purchases  ledger  has  been  proved  so  that  there  will  be  no  possible  error  in  closing  the 
account. 


228 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  97.     Purchases  Ledger  Account. 

SALES  LEDGER  ACCOUNT. 

§  251.  The  Object  of  this  Account  is  to  keep  a  record,  in  total,  of  the  various  amounts 
due  from  customers  as  shown  by  the  accounts  in  the  sales  ledger.  It  is  a  controlling  account  (§  249), 
and  must  appear  in  the  general  ledger. 


Debit  the  Sales  Ledger  Account: 

\  I.  At  the  end  of  each  month  with  the  total 
of  the  sales  book,  whether  this  repre- 
sents the  sales  from  one  department 
or  a  number  of  departments. 


Credit  the  Sales  Ledger  Account: 

^  2.     With  the  total  of  the  sales  ledger  column 

on  the  debit  side  of  the  cash  book,  at 

the  end   of  the   month. 
^  3,     With  the  total  of  the  bales  ledger  column 

in  the  journal  (if  one  is  kept),  at  the 

end  of  the  month. 
\  4.     With    the    total    of    the    goods    returned 

book,  at  the  end  of  the  month. 
T[  5.     With  the  total  of  the  sales  ledger  column 

in    the   notes   receivable   book,    at   the 

end  of  the  month,  if  this  book  is  used 

as  a  book  of  original  entry. 
^  6.     With  the  total  of  the  sales  ledger  column 

in  any  other  book  of  original  entry,  at 

the  end  of  the  month. 


^  7.  The  Balance  of  this  Account  shows  the  amounts  due  from  customers,  and  must  be  the 
same  as  the  total  of  the  various  balances  shown  in  the  sales  ledger.  It  is  a  resource,  and  is  listed 
with  the  resources  on  the  Financial  statement.  After  the  general  Trial  Balance  is  made,  and  proved 
to  be  correct,  the  various  balances  shown  by  the  sales  ledger  are  proved  by  comparing  the  total 
with  the  difference  of  this  account. 

^  8.  To  Close  the  Sales  Ledger  Account.  This  account  is  not  closed  until  it  balances,  unless 
it  is  desired  to  bring  the  balance  down  on  the  same  page  or  transfer  it  to  a  new  page.  If  it  bal- 
ances, it  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink.  If  it  is  made  to  balance, 
the  difference  is  entered  on  the  credit  side  in  red  ink,  the  account  ruled  with  single  and  double  red 
lines,  footed  in  black  ink  and  the  balance  brought  down  on  the  same  page,  or  transferred  to  a  new 
page  on  the  debit  side  with  black  ink. 


NOTE. — Some  bookkeepers  prefer  to  close  this  account  at  the  end  of  each  month, 
under  §  250. 


This  is  explained  in  the  note 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


229 


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Illustration  No.  98.     Sales  Ledger  Account. 

GOOD  WILL  ACCOUNT. 

§  252.  The  Object  of  this  Account  is  to  show  the  value  of  good  will  that  is  considered  as 
an  asset  of  the  business.  Good  will  may  be  defined  as  a  special  value  attached  to  a  particular  business, 
in  addition  to  the  actual  value  of  the  property  used  in  conducting  the  business.  This  may  be  brought 
about  through  the  value  of  the  trade  mark  or  the  reputation  or  skill  of  the  organization,  the  reputa- 
tion of  the  goods  sold,  or  any  peculiar  advantages  of  the  business  on  account  of  location,  etc.  It  may 
also  include  patents,  copyrights,  etc.  To  illustrate:  Davis  Bros,  have  been  conducting  a  retail  cloth- 
ing business  at  the  corner  of  Fourth  and  Main  streets  for  a  number  of  years,  and  have  established 
a  good  trade,  brought  about  through  judicious  advertising  and  the  proper  treatment  of  their  customers. 
They  decide  to  incorporate  and  sell  stock.  It  is  very  evident  that  they  would  not  issue  stock  for  the 
actual  value  of  the  property  belonging  to  the  business,  and  thus  lose  all  the  profits  which  are  being 
derived  from  the  business  having  a  good  patronage.  The  estimated  value  of  this  would  be  Good,  Will. 
This  value  must  be  determined  by  Davis  Bros.,  and  those  to  whom  the  stock  is  to  be  sold. 

The  Good  Will  account  should  never  be  used  to  offset  over-capitalization,  and  to  do  this,  is  not 
only  poor  business  policy,  but  might  be  considered  dishonesty.  While  the  bookkeeper  is  supposed 
to  follow  the  instructions  of  those  who  employ  him,  we  would  suggest  to  the  student,  that  if  he  should 
ever  assume  the  position  of  bookkeeper  for  a  firm  that  wanted  to  over-capitalize  and  open  up  a  Good 
Will  account  to  counter-balance  this  over-capitalization,  that  he  resign  at  once.  The  position  is  one 
not  to  be  desired,  and  a  business  conducted  by  men  who  use  such  methods  is  sure  to  meet  failure 
sooner  or  later.  "Honesty  is  the  best  policy,"  and  the  bookkeeper  should  always  know  that  the  en- 
tries he  is  required  to  make  are  along  the  lines  of  honesty  and  justice. 


Debit  the  Good  Will  Account: 


Credit  the  Good  Will  Account 


I1. 


For  the  value  of  the  good  will  acquired 
when  a  change  in  ownership  is  made. 


t  2.  This  account  is  not  credited  unless  those 
interested  in  the  business  wish  to 
close  it.  If  they  do,  it  is  credited  with 
a  part  of  the  profit  each  year,  or  a  suffi- 
cient amount  of  the  profit  for  one  year 
to  balance  it. 

^  3.  The  Balance  of  this  Account  (debit  side)  is  a  resource,  and  is  listed  among  the  resources 
on  the  financial  statement.  It  would  appear  after  all  the  active  resources  and  fixed  invest- 
ments had  been  listed. 

^4.     To  Close  the  Good  Will  Account.    As  stated,  this  account  is    not  closed  unless  those  inter- 


230 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


ested  in  the  business  wish  to  close  it.  It  is  not  good  business  policy  to  close  it,  as  it  is  one  of  the 
values  of  the  business  and  would  have  to  be  considered  if  there  should  be  any  change  in  ownership  at 
any  time.  It  is  best  to  let  the  account  remain  debited  with  the  value  of  the  good  will.  If  those 
who  assume  charge  of  the  business  after  the  Good  Will  account  is  opened,  continue  to  conduct  it  with 
a  good  business  policy,  the  value  of  the  good  will  would  not  decrease  and  might  increase,  depend- 
ing entirely  upon  the  success  of  the  business. 


QUESTIONS. 


3 
4 

5 
6 

7 
8 

9 

10 

II 

12 

13 
H 
15 


What  accounts  are  necessary  in  a  cor- 
poration  set  of  books?     (§  244.) 

Aside  from  these,  is  there  any  difference 
between  the  accounts  in  a  partnership 
or  corporation  set  of  books,  if  the  na- 
ture of  the  business  is  the  same? 
(§  244.) 

Define  the  Capital  Stock  account.  (§  245.) 

For  what  is  it  debited?  Credited?  (^^ 
1—2.) 

What  does  the  difference  show? 

Describe  the  method  of  closing  the  Cap- 
ital Stock  account. 

Define   the   Surplus   account.      (§  246.) 

Name  the  three  debits.      (^^  i — ^3.) 

Name  the  two  credits.     (^[^  4,  5.) 

What  does  the  balance  show? 

When  and  how  is  the  Surplus  account 
closed? 

Define    the    Dividend    account.      (§  247.) 

Name  the  debits  and  credits. 

What  does  the  difference  show? 

When  and  how  is  the  Dividend  account 
closed  ? 


16. 

17- 

18. 
19. 

20. 

21. 

22. 

23- 
24. 


25- 

26. 

27. 
28. 
29. 
30. 

31. 


Define     the     Treasury     Stock     account. 

(§248.) 
Give    the    two    debits    and    one    credit. 

m  1-3.) 

Define  a  controlling  account.     (§  249.) 

Name  some  of  the  advantages  of  a  con- 
trolling account. 

Define  the  Purchases  Ledger  account. 
(§250.) 

Name    the    special    debits    and    credits. 

(Hlf  I-4-) 

What   does    the    balance   show? 

When  and  how  is  the  account  closed? 

Is  it  best  to  rule  the  account  and  bring 
the  balance  down  at  the  end  of  each 
month?       (§  250,  Note.) 

Define  the  Sales  Ledger  account.  ((§  251.) 

Name  the  special  debit  and  five  special 
credits.     (^[If  i — 6.) 

What  does  the  balance  show? 

When  and  how  is  the  account  closed? 

Define  good  will.     (§  252.) 

What  is  the  object  of  the  Good  Will  ac- 
count?    (§  252.) 

For    what    is    it    debited    and    credited? 

m  I,  2.) 


SPECIAL  ACCOUNTS  WITH  SELLING  EXPENSE. 

§  253.  As  Explained  in  §  170,  the  object  of  the  Selling  Expense  account  is  to  show  the  cost  of 
selling  merchandise.  While  one  account  may  represent  the  total  cost,  yet  it  is  best  practice  to  keep 
several  accounts  in  order  that  the  proper  units  of  information  may  be  obtained.  There  are  a  number 
of  accounts  that  can  be  kept,  but  it  is  not  best  to  keep  too  many,  as  the  cost  of  keeping  them  will 
more  than  counter-balance  the  advantage  gained.  The  most  important  accounts  are:  Warehouse 
Expense,  Delivery  Expense,  Advertising,  Traveling  Expense,  and  Salaries  in  Selling  Department. 

WAREHOUSE  EXPENSE  ACCOUNT. 


§  254.  The  Object  of  this  Account  is  to  show  the  cost  of  maintaining  the  warehouse  or  ship- 
ping room.  The  exact  point  at  which  the  cost  of  merchandise  to  be  sold  ends,  and  the  selling  expense 
begins,  is  ppen  to  argument.  The  question  must  be  decided  by  the  nature  of  the  business,  and  the 
desire  of  those  interested  in  the  business.     The  cost  of  merchandise  is  best  defined  as  the  invoice 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


231 


price,  plus  transportation  cost,  drayage  cost,  and  the  cost  of  preparing  the  goods  for  sale.  If  this 
definition  is  accepted,  the  selling  expense  would  begin  with  the  salary  of  the  clerk  or  salesman  who 
made  the  sale,  and  would  include  the  cost  of  preparing  the  goods  for  shipment,  the  delivery  to  the 
customer's  place  of  business,  or  the  transportation  company,  if  this  is  not  in  the  same  city.  As  a  gen- 
eral rule,  goods  are  ready  for  sale  when  they  are  received  in  the  warehouse,  and  in  many  lines  the 
original  packages  received  from  the  factory  are  re-shipped  to  the  customer.  This  is  especially  true 
in  canned  goods,  fruits,  vegetables,  soaps,  flour,  etc.  In  order  to  avoid  too  many  accounts,  it  is  best 
to  consider  the  expense  of  maintaining  the  warehouse  as  a  part  of  the  selling  cost.  If  for  any  reason, 
a  part  of  this  expense  belongs  to  the  cost  of  merchandise,  this  can  be  adjusted  by  a  journal  entry 
once  each  month,  or  at  the  close  of  the  fiscal  period.  With  few  exceptions,  the  principal  cost  in  the 
warehouse  is  brought  about  by  preparing  goods  for  shipment,  hence  the  reason  for  recommending 
that  this  account  be  considered  a  part  of  the  selling  expense.  If  considerable  work  is  required  on  the 
merchandise  after  it  is  received  from  the  freight  station,  the  business  assumes  the  nature  of  manu- 
facturing, and  the  charges  should  be  added  to  the  manufacturing  cost,  rather  than  to  the  original 
cost  of  the  merchandise. 


Debit   the    Warehouse   Expense   Account: 


Credit  the   Warehouse  Expense  Account: 


^  I.     For  all  amounts  paid  employees  in   the  ^3. 

warehouse  or  shipping  room. 

T[  2.     For  all  supplies  purchased  for  use  in  the  ^  4. 

shipping  department,  such  as  wrap- 
ping paper,  twine,  marking  ink,  ship- 
ping cases,  nails,  etc. 


For  any  amounts  received  that  decrease 

the  warehouse  expense. 
For  any  amounts  received  from  the  sale 

of    property,    the    cost    of    which    was 

charged  to  this  account. 


^5.  The  Difference  between  the  two  sides  of  this  Account  shows  the  cost  of  maintaining  the 
warehouse  or  shipping  room,  and  is  one  of  the  costs  of  selling  the  merchandise.  It  is  listed  with 
the  selling  expense  on  the  Profit  and  Loss  statement. 


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Illustration  No.  99.     Warehouse  Expense  Account. 


232  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

^6.  To  Close  the  Warehouse  Expense  Account.  After  the  Financial,  Trading,  and  Profit  and 
Loss  statements  have  been  made  and  proved  to  be  correct,  unless  a  special  Selling  Expense  or 
Sales  Expense  Account  is  kept  in  the  ledger,  this  account  is  closed  by  the  journal  entry  that  closes 
the  accounts  affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account.  After 
the  journal  entry  has  been  posted,  the  account  is  ruled  with  single  and  double  red  lines  and  footed  in 
black  ink. 

NOTE — At  the  close  of  the  fiscal  period,  there  may  be  some  property  on  hand  the  value  of  which  was  charged  to 
this  account.  If  so,  the  Sundry  Resource  Inventories  account  is  debited,  and  the  Warehouse  Expense  account  credited, 
when  the  journal  entries  required  at  the  close  of  the  fiscal  period  are  made.  Where  a  large  quantity  of  supplies  are  pur- 
chased for  use  in  the  warehouse,  it  is  best  to  keep  a  separate  account  designated  as  "Warehouse  Supplies."  This  account 
would  be  debited  and  credited  with  the  inventory  at  the  close  of  the  fiscal  period,  the  difference  being  charged  to  the  Ware- 
house Expense  account,  or  Selling  Expense  account. 


DELIVERY  EXPENSE  ACCOUNT. 

§  255.  The  Object  of  this  Account  is  to  show  the  cost  of  delivering  goods,  either  to  the  cus- 
tomer's place  of  business  or  to  the  freight  station.  The  account  also  includes  freight  on  goods  sold, 
where  the  delivery  was  to  be  made  f.  o.  b.  the  customer's  freight  station.  It  is  a  part  of  the  selling 
expense. 

Debit    the    Delivery    Expense    Account:  Credit    the    Delivery    Expense    Account: 

Tf  I.     For    all    amounts    paid    to    drivers    and  f  5.     For  any  amounts  received  that  decrease 

others   who   assist   in    delivering    mer-  the  delivery  expense, 

chandise.  ^  6.     For  amounts  received  from  the  sale  of 

^  2.     For   all    amounts    paid    for    maintaining  any   property,   the  cost  of  which   was 

the  delivery  equipment,   such  as  feed  charged  to  this  account, 

for  horses,   livery   bill,   repairs   on   de- 
livery equipment,  etc. 

Tf  3.  For  all  amounts  paid  for  transportation 
charges  on  merchandise,  which  was 
sold  f.  o.  b.  the  customer's  freight  sta- 
tion. 

Tf  4.  For  any  other  expenses  connected  with 
the  delivery  of  goods,  which  includes 
insurance  on  delivery  equipment,  de- 
preciation of  delivery  equipment,    etc. 

^7.  The  Difference  between  the  two  sides  of  this  Account  shows  the  cost  of  delivering  goods, 
and  is  a  part  of  the  selling  expense.  It  appears  on  the  Profit  and  Loss  statement,  as  a  part  of  the 
selling  expense. 

^8.  To  Close  the  Delivery  Expense  Account.  This  account  is  closed  by  the  journal  entry  that 
closes  the  accounts  affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account. 
After  this  entry  is  posted,  the  account  is  ruled  with  single  and  double  red  lines  and  the  footings 
entered  in  black  ink. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


233 


ADVERTISING  ACCOUNT. 


§  256.  The  Object  of  this  Account  is  to  keep  a  record  of  amounts  expended  for  advertising. 
This  is  a  part  of  the  selling  expense,  and  includes  the  amounts  paid  for  newspaper  advertising,  maga- 
zine advertising,  advertising  novelties,  etc. 


Debit   the   Advertising   Account: 

f  I.     For  all  amounts  paid  for  advertising.  ^3. 

^  2.     For  all   property   purchased   to  be   used 

for  advertising.  ^  4. 


Credit   the   Advertising   Account: 

For  any  amounts  received  that  serve  to 
decrease   the   advertising   expense. 

For  any  amounts  received  for  the  sale 
of  property,  the  cost  of  which  was 
charged  to  this  account. 


^  5.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  cost  of  advertising,  and  is 
a  part  of  the  selling  expense.  It  appears  on  the  Profit  and  Loss  statement  among  the  operating  ex- 
penses. 

^6.  To  Close  the  Advertising  Account.  This  account  is  closed  by  the  journal  entry  made  to 
close  the  accounts  affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account. 
After  the  entry  is  posted,  the  account  will  balance  and  is  ruled  with  single  and  double  red  lines  and 
the  footings  entered  in  black  ink. 


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>A;^/. 

/ 

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/  /  f 

^^ 

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Illustration  No.  100.     Advertising  Account. 

TRAVELING  EXPENSE  ACCOUNT. 

§  257.  This  Account  is  Explained  in  §  216,  and  its  use  was  illustrated  in  the  preceding  set. 
It  is  mentioned  here  because  it  is  a  part  of  the  selling  expense,  and  should  be  considered  as  such.  As 
explained,  it  is  debited  (^  i)  for  the  salaries  of  traveling  men;  (^  2)  for  travehng  expenses,  such  as  hotel 
bills,  transportation,  etc.,  of  traveling  men;  and  credited,  (^3)  for  any  amounts  received  that  decrease 
the  cost  of  the  account. 

The  difference  between  the  two  sides  of  this  account  shows  the  net  amount  paid  to  traveling  men. 
A  special  account  is  necessary  in  order  to  estimate  the  cost  of  selling  goods,  and  the  salary  of  each 
traveling  man  is  fixed  on  the  net  profit  he  produces  the  business. 


234  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

SALARIES  IN  SELLING  DEPARTMENT  ACCOUNT. 

§  258.  The  Object  of  this  Account  is  to  show  amounts  paid  employees  in  the  selHng  depart- 
ment. When  other  special  accounts  are  kept  with  the  cost  of  selling  merchandise,  it  is  necessary  to 
keep  this  account. 

Debit  Salaries  in  Selling  Department  Account:  Credit  Salaries  in  Selling  Department  Account: 

^  I.     For  all  salaries  of  employees  in  the  selling  ^  2.     For   any   amounts   received   that   reduce 

department,     which     includes     salaries  the  charges  to  this  account, 

paid  the  credit  man,  clerks,  bill  clerks, 
shipping  clerks,   etc. 

^3.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  amount  paid  employees 
in  the  selling  department,  and  is  used  in  connection  with  the  other  accounts  showing  the  cost  of 
selling  merchandise,  when  the  Profit  and  Loss  statement  is  made  at  the  close  of  the  fiscal  period. 

^  4.  To  Close  the  Salaries  in  the  Selling  Department  Account.  Unless  a  special  Selling  Expense  or 
Sales  Expense  account  is  kept  in  the  ledger,  and  the  various  accounts  showing  the  cost  of  selling 
goods  closed  into  it,  this  account  is  closed  by  the  journal  entry  to  close  the  profit  or  loss  accounts 
into  the  Profit  and  Loss  account  at  the  end  of  the  fiscal  period.  When  this  entry  is  posted,  the 
account  will  balance  and  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink.  If  only 
one  entry  appears  on  each  side,  double  lines  may  be  used  as  explained. 

FREIGHT  OUT  ACCOUNT. 

§  259.  The  Object  of  this  Account  is  to  keep  a  record  of  all  freight  and  express  charges  on  goods 
sold  customers  and  delivered  f.  o.  b.  their  freight  station.  It  is  a  part  of  the  selling  cost  for  the  same 
reason  as  delivery  expense.  The  inattentative  student  is  apt  to  confuse  this  account  with  that  of 
Freight  In.  He  must  keep  in  mind  the  fact  that  all  freight  or  express  charges  paid  on  goods  pur- 
chased, add  to  the  cost  of  goods  purchased,  and  is  charged  to  the  Freight  In  account;  and  that  all 
freight  or  express  on  goods  shipped  to  customers  increases  the  selling  expense,  and  is  charged  to  the 
Freight  Out  account. 

Debit  the  Freight  Out  Account:  Credit  the  Freight  Out  Account: 

^  I.     For  all  amounts  paid  for  freight  or  ex-  ^3.     For  any   amounts   received   that   reduce 

press  on  goods  shipped  to  a  customer  the  charges,  such  as  rebates  on  freight 

f.  o.  b.  his  freight  station.  charges,   express,   etc. 

^  2.  For  all  amounts  credited  to  a  customer 
for  freight  or  express  charges  which 
he  pays  and  charges  to  our  account. 

^4.  The  Difference  between  the  two  sides  of  this  Account  shows  the  net  amount  paid  to  trans- 
portation companies  for  delivering  goods  to  customers,  and  is  a  part  of  the  selling  expense.  It  is 
listed  with  the  other  selling  expense  accounts  on  the  Profit  and  Loss  statement. 

^5,  To  Close  the  Freight  Out  Account.  This  account  is  closed  by  the  journal  entry,  which  is 
made  to  close  the  Profit  or  Loss  accounts  into  the  Profit  and  Loss  account.  When  this  entry  has  been 
posted,  the  account  will  balance,  and  is  ruled  with  single  and  double  red  lines  and  footed  in  black 
ink. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


235 


OTHER  ACCOUNTS  USED  IN  THIS  SET. 

§  260.  The  Following  Accounts  which  have  been  explained  in  preceding  sets  are  used :  Pur- 
chases (§  154);  Sales  (§  155);  Freight  In  (§  156);  Inventory  (§  157);  Purchases  Discount  (§  159); 
Sales  Discount  (§  160) ;  Office  Equipment  (§  162) ;  Reserve  for  Depreciation  of  Office  Equipment 
(§  163);  Store  Fixtures  (§  164);  Reserve  for  Depreciation  of  Store  Fixtures  (§  165);  Delivery  Equip- 
ment (§  166);  Reserve  for  Depreciation  of  Delivery  Equipment  (§  167);  General  Administrative  Ex- 
pense (§169);  Insurance  (§171);  Sundry  Resource  Inventories  (§194);  Sundry  Liability  Inven- 
tories (§  196).     Reserve  for  Bad  Debts  (§  213). 

QUESTIONS. 


I. 

2 

3 

4 

5 


10. 

II 
12 

13 

14 

15 
16. 


Define  the  General  Administrative  Ex- 
pense account.     (§  169.) 

Define  Selling  Expense  account.     (§  170.) 

What  special  accounts  may  be  kept  with 
selling  expense?     (§  253.) 

Define    warehouse    expense.       (§  254.) 

When  is  warehouse  expense  a  part  of  the 
cost   of   merchandise?      (§  254.) 

When  is  it  a  part  of  the  selling  expense 
cost?     (§  254.) 

What  is  the  object  of  the  Warehouse  Ex- 
pense account?     (§  254.) 

For    what    is    it    debited    and    credited? 

m  I-4-) 

If  one  account  is  kept  with  warehouse 
expense,  and  a  part  of  this  expense 
belongs  to  the  cost  of  goods  purchased 
and  the  other  part  to  the  cost  of  sell- 
ing, when  and  how  are  these  costs  ad- 
justed?    (§  254.) 

What  does  the  difference  of  Warehouse 
Expense  account  show?     (§  254,  1|  5.) 

When  and  how  is  it  closed?     (§  254,  ^6.) 

What  is  the  object  of  the  Delivery  Ex- 
pense account?     (§  255.) 

For    what    is    it    debited    and    credited? 

m  1-6.) 

What  does  the  difference  of  the  Delivery 

Expense  account  show?      (§255,   T[  7.) 

"^hen  and  how  is  it  closed?  (§  255,  ^8.) 

What    is   the    object    of   the    Advertising 

account?     (§  256.) 


17- 

18. 
19. 
20. 
21. 

22. 

23- 
24. 

25- 

26. 

27. 
28. 


29. 
30- 


For    what    is    it    debited    and    credited? 

m  I-4-) 

What  does  the  difference  of  the  Adver- 
tising account  show?     (§  256,  ^5.) 

When  and  how  is  the  account  closed? 
(§256,  1[6.) 

What  is  the  object  of  the  Traveling  Ex- 
pense account?     (§§  216,  257.) 

For    what    is    it    debited    and    credited? 

(§  257,  nil  1-3.) 

What  does  the  difference  show?     (§  257.) 
When  and  how  is  it  closed?     (§  257.) 
Why  is  it  necessary  to  keep  an  account 
with    salaries    paid    employees    in    the 
selling  department?     (§  258.) 
What  six  accounts  usually  represent  the 
purchases    and    sales    of    merchandise? 
(§§  153,   154—160.) 
Why  is  it  best  to  keep  special  accounts 
with    property    purchased    for    use    in 
the  business?     (§  161.) 
What   three    accounts   are    usually    used? 

(§§  162,  164,  and  166.) 
Why  is  it  necessary  to   keep  a   Reserve 
for    Depreciation    with    each    fixed    in- 
vestment   account?      (§  163.) 
Define   the    Insurance    account.      (§  171.) 
Distinguish  between  Sundry  Resource  In- 
ventories   and     Sundry    Liability     In 
ventories  accounts,   and   explain  when 
these    accounts    are    opened    up,    and 
how  they  are  closed.     (§§  194,  196.) 


236  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


BLANK  BOOKS. 

In  the  preceding  set  the  student  has  used  only  four  books  of  original  entry — the  journal,  cash 
book,  sales  book  and  purchases  book.  In  this  set  he  will  have  seven  books  of  original  entry,  the  four 
mentioned  and  the  notes  receivable,  notes  payable,  and  goods  returned  book.  All  credit  sales  will 
be  recorded  in  the  sales  book,  credit  purchases  in  the  purchases  book,  cash  received  and  paid  in  the 
cash  book,  notes  received  or  drafts  accepted  by  customers  in  the  notes  receivable  book,  notes  signed 
or  drafts  accepted  by  the  business  in  the  notes  payable  book,  and  goods  returned  by  customers  in 
the  goods  returned  book.    All  other  transactions  will  be  recorded  in  the  journal. 

§  261.  Journal.  This  book  is  ruled  with  three  money  columns,  two  for  debits  and  one  for 
credits.  By  comparing  illustration  No.  loi  with  the  journal  he  is  to  use,  the  student  will  note  that 
the  first  column  is  for  General  Ledger,  Dr.,  the  second  column.  Purchases  Ledger,  Dr.,  and  the  third 
column.  General  Ledger,  Cr.  If  a  transaction  affects  an  account  which  appears  in  the  purchases  ledger, 
the  debit  amount  is  entered  in  the  second  column  and  the  credit  amount  in  the  third  column.  If  the 
accounts  affected  are  all  in  the  general  ledger,  the  debit  amount  or  amounts  are  entered  in  the  first 
column  and  the  credit  amount  or  amounts  in  the  third  column.  When  a  page  in  the  journal  is  full 
the  three  columns  are.  added.  If  the  total  of  the  two  debit  columns  equals  the  total  of  the  credit  col- 
umn, the  entries  are  correct  and  the  totals  are  forwarded  to  the  top  of  the  next  page.  At  the  end 
of  the  month,  the  total  of  the  second  or  purchases  ledger  column  is  posted  to  the  debit  side  of  the  Pur- 
chases Ledger  account  in  the  general  ledger.  The  various  amounts  are  posted  to  the  debit  or  credit 
side  of  the  proper  accounts  at  the  time  the  posting  is  done.  If  the  account  is  in  the  purchases  ledger, 
the  amount  is  entered  in  the  second  column,  hence  posted  to  that  ledger.  After  this  is  done,  the  total 
of  the  second  column  will  equal  the  debits  posted  to  the  various  accounts  in  the  purchases  ledger,  hence 
the  reason  for  posting  this  total  to  the  debit  side  of  the  Purchases  Ledger  account.  The  balance  of 
the  Purchases  Ledger  account  must  equal  the  sum  of  all  the  accounts  in  the  purchases  ledger. 

§  262.  Sales  Book.  A  correct  record  of  credit  sales  is  absolutely  necessary.  This  requires 
more  care  than  any  other  work  in  an  office,  because  of  errors  that  may  occur  in  making  the  record. 
Many  wholesale  houses  provide  special  order  blanks  and  require  each  salesman,  whether  he  is  in  the 
house  or  on  the  road,  to  enter  the  order  which  he  takes  from  a  customer  on  this.  This  order  is  then 
given  to  the  stock  clerks  to  assemble  the  goods,  and  goes  with  the  goods  to  the  shipping  clerk  to  be 
shipped.  After  shipment  has  been  made,  the  order  is  returned  to  the  office  and  an  invoice  made  by 
the  bill  clerk;  thus  the  correct  record  of  goods  sold  is  used  by  the  various  clerks  and  as  a  final  record 
of  the  sale.    This  avoids  the  many  mistakes  that  might  be  made  in  copying  the  sales. 

In  this  set,  the  salesman  enters  the  items  he  sells  a  customer  on  a  special  prepared  order  blank, 
as  described  above,  and  this  record  is  used  by  the  stock  clerk,  shipping  clerk,  bill  clerk  and  bookkeeper. 
The  orders  are  punched  to  fit  the  special  loose  leaf  binders,  and  after  the  bill  has  been  made  and  the 
extensions  entered  by  the  bookkeeper,  it  is  placed  in  this  file,  which  is  the  sales  book.  If  any  article 
sold  a  customer  is  out  of  stock,  or  a  part  of  it  is  out  of  stock,  this  is  noted  on  the  order  by  the  stock 
clerk,  and  also  on  the  bill  by  the  bill  clerk,  who  makes  out  a  back-order  for  the  shortage  and  retains 
it  on  his  desk  until  the  goods  are  received.  When  they  are  received  the  order  is  completed,  unless 
the  customer  cancels  it.  If  the  freight  or  express  is  to  be  prepaid  or  to  be  credited,  the  shipping 
clerk  ascertains  the  amount  and  enters  it  on  the  order.  This  information  is  for  the  bill  clerk  and 
bookkeeper. 

Each  customer  is  charged  in  the  sales  ledger  with  the  value  of  merchandise  shipped  him,  as  in- 
dicated by  the  extensions  on  the  orders.  At  the  close  of  each  day,  the  bookkeeper  enters  the  order 
number  and  amount  on  the  recapitulation  sheet,  and  at  the  end  of  the  month,  the  total  of  this  sheet 
is  posted  to  the  debit  side  of  the  Sales  Ledger  account  in  the  general  ledger,  and  to  the  credit  side 
of  the  Sales  account.      The  recapitulation  sheet  is  filed  above  the  last  order  and  indicates  that  all 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


237 


^.  /f/ 


L.E 


General  Ledoer 
Dr.    ^ 


Pujcha^ej  Ledger 


General  Led  gen 
Gr. 


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Illustration  No,  loi.  Journal. 


238 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Date 


L.F 


Account    Credited 


Add 


re^^ 


Purchases  Ledger 
Cr. 


Parcliaje^ 

Dr 


Drv. 


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Illustration  No.  102.     Left  Page  of  Purchases  Book. 

orders  below  it  have  been  posted.    The  advantage  of  the  recapitulation  sheet  is  that  it  shows  at  the 
end  of  each  day  the  total  sales. 

This  method  of  recording  credit  sales  is  very  popular  in  business,  because  it  permits  a  greater 
degree  of  accuracy  and  prevents  an  unnecessary  waste  of  time  in  copying  the  items  sold.  When  this 
method  is  not  used,  as  a  general  rule,  a  carbon  copy  is  made  of  the  bill  andthis  is  used  as  the  sales  book 
record.  Each  method  has  its  advantage,  depending  entirely  upon  the  nature  of  the  business  and  the 
method  of  making  sales. 

§  263.  Purchases  Book.  The  invoices  will  not  be  pasted  in  the  purchases  book  as  instructed 
in  the  preceding  set,  but  will  be  entered  in  a  special  ruled  book  and  filed  in  the  Invoice  file.  Each 
invoice  is  numbered  in  consecutive  order,  beginning  with  i,  and  should  be  filed  in  the  same  order. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


239 


Date 


No 


Termj 


Lasl  Di^ct  Dax 


Amounl 
Due 


When  6- How  Paid 


l^vemarto. 


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J 


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Illustration  No.  102.     Right  Page  of  Purchases  Book. 


Illustration  No.  102  shows  the  form  of  the  purchases  book  to  be  used.  At  the  beginning,  the  stu- 
dent will  not  use  the  third  money  column,  which  will  be  introduced  and  explained  later.  The  columns 
in  the  purchases  book  are  arranged  for  all  the  necessary  facts,  also  for  special  information  relative 
to  when  an  invoice  is  due,  the  amount  that  must  be  paid,  etc.  Each  person  or  firm  is  credited  in  the 
purchases  ledger  with  the  amount  of  the  invoice  purchased  from  him.  At  the  end  of  the  month,  the 
total  of  the  purchases  ledger  column  is  posted  to  the  credit  side  of  the  Purchases  Ledger  account  in 
the  general  ledger,  and  the  total  of  the  purchases  column,  to  the  debit  side  of  the  Purchases  account. 
When  an  invoice  is  paid,  it  should  be  checked  in  the  purchases  book  to  show  that  it  has  been  paid. 
The  small  check  rnark  to  the  right  of  the  due  date  indicates  that  a  check  has  been  sent.  By  check- 
ing in  this  manner,  those  interested  will  know  at  a  glance  the  invoices  that  are  paid. 


240 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


'i^^/k^' 


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Illustration    No.    103.     Debit    side    of    Cash    Book. 

§  264.  Cash  Book.  As  explained  in  §  1 14,  the  object  of  the  cash  book  is  to  contain  a  record 
of  all  cash  received  and  paid.  Since  this  book  usually  contains  more  transactions  than  any  other, 
special  columns  can  be  used  to  a  great  advantage.  In  this  set  the  book  to  be  used  will  contain  five 
columns  on  each  side.  Illustrations  Nos.  103  and  104  show  the  form  and  use  of  each.  By  referring 
to  these,  the  student  will  note  that  the  first  column  on  the  debit  side  is  for  amounts  that  are  to  be 
posted  to  the  general  ledger;  the  second  column  is  for  amounts  that  are  to  be  posted  to  the  sales 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


241 


(Z^ 

«< 

^~~^^:^^>€^ 

/>>^^.-T<>^  ^..<>-Z^/Q . 

Dale 

LF 

/^ame  of  Accounl 

^K.K^ 

General  Ledger 
Dr. 

Purchases  LedOcr 
Dr 

Purchases  1 
Discount 

Cr       1 

Geril.AdmrExp 
Dr. 

fiank 

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r^ 

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Illustration  No.  104.     Credit  side  of  Cash  Book. 

ledger;  the  third  column  is  for  discounts  deducted  by  customers  for  prompt  payment;  the  fourth 
column  is  for  cash  sales ;  and  the  fifth  column  is  for  amounts  deposited  in  the  bank.  He  will  also  note 
that  the  first  column  on  the  credit  side  is  for  amounts  to  be  posted  to  the  general  ledger;  the  second 
column  is  for  amounts  to  be  posted  to  the  purchases  ledger;  the  third  column  is  for  discounts  deducted 
by  us  for  prompt  payment;  the  fourth  column  is  for  general  administrative  expense;  and  the  fifth 
column  for  amounts  withdrawn  from  the  bank.    The  third  column  on  each  side  does  not  affect  cash, 


242.  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

because  the  net  amount  of  money  received  or  paid  is  entered;  thus,  if  a  customer  owes  $100.00, 
and  pays  this  by  a  check  for  $97.00,  the  $3.00  being  deducted  as  per  terms  of  the  bill,  he  is 
credited  with  the  $97.00  in  the  second  column,  and  the  $3.00  discount  in  the  third  column. 
In  the  same  way  if  we  owe  an  invoice  of  $1,000.00,  and  pay  it  by  a  check  for  $960.00,  the 
deduction  being  made  as  per  terms  of  the  invoice,  the  creditor  is  charged  with  the  $960.00  in  the 
second  column,  and  the  $40.00  in  the  third  column. 

^  I.  To  Prove  Cash.  Foot  the  five  columns  on  the  debit  and  credit  sides,  and  enter  the  total 
of  each  column  in  small  pencil  figures  just  below  the  blue  line  on  which  the  last  entry  is  made.  These 
pencil  footings  are  entered  below  the  same  blue  line,  so  that  the  date  when  the  cash  was  proved  can  be 
shown  at  a  glance.  The  difference  between  the  total  of  the  first,  second  and  fourth  columns  on  the 
debit  side  and  the  total  of  the  first,  second  and  fourth  columns  on  the  credit  side  is  the  cash 
balance,  which  should  be  the  same  as  the  difference  between  the  fifth  column  on  the  debit  and  credit 
side,  if  all  the  money  has  been  deposited.  If  not,  the  amount  of  money  on  hand  must  be  added  to 
the  bank  balance. 

^  2.  Method  of  Keeping  the  Bank  Account.  The  balance  in  the  bank  at  the  first  of  the  month 
is  entered  in  the  fifth  column.  When  a  deposit  is  made,  the  money  and  checks  on  hand  are  listed 
on  the  deposit  ticket  in  the  same  order  as  they  are  entered  in  the  cash  book.  At  the  same  time  the 
amount  of  the  deposit  is  entered  in  the  fifth  column,  on  a  line  with  the  last  entry  in  the  cash  book; 
thus  the  total  of  the  fifth  column  will  equal  the  amount  in  the  bank,  after  the  deposit  has  been  made, 
if  none  has  been  withdrawn.  When  a  check  is  written,  the  amount  is  entered  on  the  credit  side  of 
the  cash  book,  and  a  check  mark  placed  on  the  check  stub  to  show  that  it  has  been  entered.  The 
amount  is  placed  in  the  proper  column  or  columns  according  to  the  account  or  accounts  affected. 
At  the  same  time  the  amount  of  the  check  is  extended  into  the  fifth  or  bank  column.  The  total  of 
this  column  will  equal  the  total  amount  of  money  withdrawn  from  the  bank,  and  the  difference  be- 
tween the  bank  column  on  the  debit  side  of  the  cash  book  and  the  bank  column  on  the  credit  side, 
will  be  the  amount  of  money  in  the  bank.  After  all  the  money  has  been  deposited,  the  difference 
between  the  total  of  the  first,  second  and  fourth  columns  on  the  debit  side,  and  the  total  of  the  first, 
second  and  fourth  columns  on  the  credit  side,  will  be  the  same  as  the  difference  between  the  fifth 
columns  on  the  debit  and  credit  sides.  If  any  money  remains  on  hand,  this  must  be  added  to  the 
difference  between  the  fifth  columns.  The  cash  balance  and  bank  balance  should  be  written  in  small 
pencil  figures  at  the  left,  as  shown  in  the  illustration.  When  a  bank  account  is  kept  in  the  cash  book, 
it  is  not  necessary  to  subtract  each  check  on  the  check  stub,  as  one  record  is  sufficient. 

1  3.  To  Prove  the  Sales  Discount  and  Purchases  Discount  Columns.  Since  the  amounts  entered 
in  these  columns  do  not  affect  the  cash  balance,  the  totals  can  not  be  accepted  as  correct  until 
they  have  been  proved.  If  an  adding  machine  is  used  in  the  office,  the  bookkeeper  can  very  easily 
verify  the  addition  of  these.  If  there  is  no  adding  machine,  these  columns  must  be  added  very 
carefully,  as  an  error  in  the  addition  of  these  would  affect  the  Trial  Balance.  These  columns  should 
be  footed  each  time  the  cash  is  proved,  because  the  totals  must  be  posted  at  the  end  of  the  month. 

T[  4.  To  Post  from  the  Debit  Side  of  the  Cash  Book.  Each  amount  entered  in  the  first  or  general 
ledger  column  on  the  debit  side,  is  posted  to  the  credit  of  the  account  written  on  the  same  line  with 
it,  this  account  being  in  the  general  ledger.  Each  amount  entered  in  the  second  or  sales  ledger  col- 
umn is  posted  to  the  credit  side  of  the  customer's  account  written  on  the  same  line  with  it,  this  ac- 
count being  in  the  sales  ledger;  if  any  discount  has  been  allowed,  the  amount  of  this,  which  is  entered 
in  the  third  or  discount  column,  is  posted  to  the  credit  side  of  the  customer's  account,  the  two  amounts 
being  posted  separately.  Amounts  entered  in  the  fourth  column  are  not  posted  until  the  end  of  the 
month,  at  which  time  the  total  only  is  posted.  The  amounts  entered  in  the  fifth  column  are  not  posted, 
because  they  represent  the  amounts  deposited  in  the  bank.  At  the  end  of  each  month,  the  total  of 
the  second  column  on  the  debit  side  is  posted  to  the  credit  side  of  the  Sales  Ledger  account  in  the 
general  ledger;  the  total  of  the  third  column  is  posted  to  the  credit  side  of  the  Sales  Ledger  account, 
and  to  the  debit  side  of  the  Sales  Discount  account;  the  total  of  the  fourth  column  is  posted  to  the 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  243 

credit  side  of  the  Sales  account.     The  total  of  the  fifth  column  is  not  posted,  unless  an  account  is 
kept  with  the  bank  in  the  general  ledger. 

•[f  5.  To  Post  from  the  Credit  Side  of  the  Cash  Book.  Each  amount  entered  in  the  first  or  general 
ledger  column  on  the  credit  side  is  posted  to  the  debit  side  of  the  account  written  on  the  same  line 
with  it,  this  account  appearing  in  the  general  ledger.  Each  amount  in  the  second  or  purchases  ledger 
column  is  posted  to  the  debit  side  of  the  account  written  on  the  same  line  with  it,  this  account  appear- 
ing in  the  purchases  ledger;  if  any  discount  is  deducted,  it  is  entered  in  the  third  column,  and  must 
be  posted  to  the  debit  side  of  the  account  written  on  the  same  line  with  it,  both  amounts  being  posted 
separately.  Amounts  entered  in  the  fourth  column  are  not  posted  until  the  end  of  the  month,  at 
which  time  the  total  is  posted.  The  amounts  entered  in  the  fifth  column  are  not  posted,  because 
they  represent  the  amounts  withdrawn  from  the  bank.  At  the  end  of  each  month,  the  total  of  the 
second  column  on  the  credit  side  is  posted  to  the  debit  side  of  the  Purchases  Ledger  account  in  the 
general  ledger;  the  total  of  the  third  column  is  posted  to  the  debit  side  of  the  Purchases  Ledger  ac- 
count, and  to  the  credit  side  of  the  Purchases  Discount  account;  the  total  of  the  fourth  column  is 
posted  to  the  debit  side  of  the  General  Administrative  Expense  account.  The  total  of  the  fifth  column 
is  not  posted,  unless  an  account  is  kept  with  the  bank  in  the  general  ledger. 

§  265.  Petty  Cash  Book.  It  is  best  practice  to  deposit  all  money  and  checks  received,  and 
make  all  payments  by  check,  and  the  student  is  advised  to  always  do  this.  If  it  is  necessary  to  make 
small  payments,  these  can  be  made  from  a  fund  kept  on  hand  for  this  purpose.  This  special  fund  to 
be  used  for  making  small  payments  with  currency  is  sometimes  called  the  "Imprest  Fund." 

This  fund  is  created  by  withdrawing  from  the  bank  an  amount  sufficient  to  meet  these  payments. 
This  may  be  ten,  twenty,  fifty  or  one  hundred  dollars,  depending  upon  the  amount  and  number  of 
payments.  As  a  general  rule,  ten  or  twenty  dollars  is  sufficient,  as  this  fund  is  used  only  for  small 
payments,  usually  those  less  than  one  dollar. 

The  amount  of  the  fund  and  the  payments  are  recorded  in  the  petty  cash  book.  The  record 
should  show  the  date  of  the  first  amount  withdrawn  to  create  the  fund,  the  check  number,  the  date 
of  each  payment,  the  name  of  the  account  affected  by  the  payment  and  the  amount.  The  petty  cash 
book  is  proved  by  counting  the  money  belonging  to  the  imprest  fund,  which  must  be  the  same  as  the 
difference  between  the  payments  and  the  amount  of  the  check.  The  imprest  fund  should  be  kept 
in  a  special  drawer  in  the  safe,  and  no  one  should  have  access  to  it  except  the  bookkeeper,  or  person 
who  makes  the  payments.  When  the  fund  is  exhausted,  another  check  is  written  and  the  proper 
charge  or  charges  are  made  in  the  cash  book  for  the  various  payments.  If  the  same  account  has  been 
affected  by  more  than  one  payment,  the  two  or  more  are  added  together  and  one  entry  made  for  all 
the  payments  affecting  that  account.  The  petty  cash  book  is  only  a  small  memorandum  book,  and 
should  be  kept  in  the  drawer  with  the  imprest  fund.  When  the  imprest  fund  is  exhausted,  the 
petty  cash  book  is  ruled.  It  is  not  necessary  for  all  the  money  belonging  to  the  imprest  fund  to 
have  been  paid  out  at  the  time  it  is  renewed;  thus,  if  the  imprest  fund  is  $20.00,  and  $19.35  has 
been  paid  out,  and  it  is  desired  to  renew  the  fund,  the  check  is  written  for  $19.35,  the  petty  cash 
book  ruled  and  65c.  balance  brought  down.  To  this  is  added  the  amount  of  the  check  written, 
which  gives  the  full  amount  of  the  imprest  fund.  When  cash  is  proved,  the  full  amount  of  the 
imprest  fund  is  considered  as  on  hand.  Thus,  if  it  is  $20.00,  the  difference  between  the  two  sides 
of  the  cash  book  will  be  $20.00  more  than  the  cash  balance  in  the  bank,  even  though  a  part  of  the 
imprest  fund  has  been  paid  out,  because  a  charge  is  not  made  in  the  cash  book  until  the  fund  is 
renewed. 

The  bookkeeper  can  not  be  too  careful  in  handling  his  cash,  as  the  auditor  will  insist  on  a  com- 
plete record  of  each  transaction  involving  the  receipts  and  payments  of  cash  and  a  voucher  to  show 
the  reasons  for  each  payment.  If  all  currency  and  checks  received  are  deposited  in  the  bank  and 
all  amounts  paid  by  check,  the  auditor  can  very  readily  satisfy  himself  relative  to  the  correctness  of 
the  Cash  account  and  cash  book.     The  bookkeeper  should  insist  on  a  receipt  for  each  amount  paid 


244 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


out  of  the  imprest  fund,  and  these  receipts  should  be  filed  in  a  special  file,  so  that  the  auditor  can 
check  each  payment  in  the  petty  cash  book. 

Illustration  No.  105  shows  the  form  of  petty  cash  book  to  be  used  in  this  set.  This,  together 
with  the  explanation  given  above,  should  be  sufificient  to  enable  the  student  to  understand  the 
method  of  keeping  this  fund. 


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§  266.  Notes  Receivable  Book.  As  explained  in  §  183,  this  book  may  be  used  either  as  an 
auxiliary  book  or  as  a  book  of  original  entry.  In  the  preceding  set  it  was  used  as  an  auxiliary  book; 
in  this  set  it  will  be  used  as  a  book  of  original  entry.  By  comparing  the  blank  book  to  be  used  with  il- 
lustration No.  63,  the  student  will  note  that  the  form  is  the  same  except  that  there  are  three  money 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  245 

columns  instead  of  one.  Tne  first  is  for  the  face  of  the  note,  the  second  for  the  interest  or  discount, 
and  the  third  for  the  amount  with  which  the  customer's  account  is  to  be  credited.  When  the  notes 
receivable  book  is  used  as  a  book  of  original  entry,  the  transaction  is  not  entered  in  the  journal,  but 
posted  direct  from  this  book  to  the  ledger.  If  the  customer  is  to  be  credited  with  the  face  of  the 
note,  the  same  amount  is  entered  in  the  first  and  third  money  column.  If  he  is  to  be  credited  with 
a  less  amount  than  the  face  of  the  note,  the  difference  being  the  interest  (discount)  to  maturity,  the 
face  of  the  note  is  entered  in  the  first  column,  the  amount  of  the  discount  in  the  second  column  in 
red  ink,  and  the  amount  with  which  the  customer  is  to  be  credited,  in  the  third  column.  If  the  value 
of  the  note  at  maturity  is  more  than  the  face  of  the  note,  the  customer's  account  will  be  credited 
with  a  greater  amount  than  that  mentioned  in  the  note.  In  this  case,  the  face  of  the  note  is  entered 
in  the  first  column,  the  interest,  in  the  second  column  in  black  ink,  and  the  amount  with  which  the 
customer's  account  is  to  be  credited  is  entered  in  the  third  column. 

^  I.  Posting  from  the  Notes  Receivable  Book.  Each  amount  entered  in  the  third  column  is  posted 
to  the  credit  side  of  the  customer's  account,  written  on  the  same  line  with  it,  and  in  the  column  marked, 
"Personal  Account  Credited."  The  account  will  always  be  found  in  the  sales  ledger.  No  amounts 
are  posted  to  either  the  Notes  Receivable  or  Interest  account  until  the  end  of  the  month.  At  that  time, 
the  three  columns  are  footed  and  ruled  with  single  and  double  red  lines,  and  proved  to  be  correct.  The 
difference  between  the  total  of  the  black  and  red  ink  entries  in  the  second  column,  if  red,  added  to 
the  total  of  the  third  column  must  equal  the  total  of  the  first  column ;  if  the  difference  is  black,  it  should 
be  subtracted.  After  the  amounts  are  proved  to  be  correct,  the  Notes  Receivable  account  in  the 
general  ledger  is  debited  for  the  total  of  the  first  column;  the  Interest  account  is  debited  for  the  total 
of  the  black  ink  entries,  and  credited  with  the  total  of  the  red  ink  entries;  the  Sales  Ledger  account 
is  credited  with  the  total  of  the  third  column.  If  desired,  the  difi^erence  between  the  totals  of  the  black 
ink  and  red  ink  entries  in  the  second  column  may  be  posted  to  the  debit  or  credit  side  of  the  Interest 
account,  but  it  is  best  to  post  both,  because  it  permits  this  account  to  show  the  true  result. 

\  2.  To  Prove  the  Notes  Receivable  Book.  When  a  note  or  accepted  draft  is  paid  in  full,  or  in 
part,  the  payment  is  credited  on  the  back  of  the  note  and  entered  in  the  remarks  column.  If  a  note 
or  draft  is  sent  to  a  bank  for  collection,  this  must  be  shown  in  the  remarks  column.  The  notes  re- 
ceivable book  is  proved  by  comparing  the  notes  or  accepted  drafts  on  hand  with  the  entries  in  the 
book.  When  this  method  is  used,  the  face  of  each  note  is  not  shown  in  the  Notes  Receivable  account, 
unless  the  bookkeeper  wishes  to  enter  them  for  information.  He  can  do  this  by  posting  the  amount 
of  each  note  at  the  end  of  the  month  instead  of  the  total.  It  is  not  necessary  to  do  this.  The  differ- 
ence of  the  Notes  Receivable  account  must  be  the  same  as  all  notes  on  hand;  that  is,  those  in  the 
"Notes"  file  and  the  ones  sent  for  collection. 

§  267.  Notes  Payable  Book.  As  explained  in  §  184,  the  object  of  this  book  is  to  keep  a  record 
of  all  notes  signed,  or  drafts  accepted  by  the  business.  The  ruling  is  the  same  as  the  notes  receivable 
book,  the  only  difference  being  in  the  use  of  the  columns.  As  explained  in  §  184,  the  book  may  be 
used  as  an  auxiliary  book  or  as  a  book  of  original  entry.  In  this  set  it  will  be  used  as  a  book 
of  original  entry.  By  comparing  the  blank  book  to  be  used  with  illustration  No.  64,  the  student 
will  note  that  the  form  is  the  same  except  that  there  are  three  money  columns  instead  of  one.  The 
first  is  for  the  face  of  the  note,  the  second  for  interest  and  the  third  for  the  amount  with  which  the 
creditor  is  charged.  When  a  note  is  signed  or  a  draft  accepted,  the  transaction  is  entered  in  this  book 
and  not  in  the  journal.  The  face  of  the  note  or  draft  is  entered  in  the  first  column.  If  the  interest 
increases  the  amount  with  which  the  creditor  is  charged,  it  is  entered  in  the  second  column  in  red 
ink.  If  it  decreases  the  amount,  it  is  entered  in  black  ink.  The  amount  with  which  the  creditor  is 
to  be  charged  is  entered  in  the  third  column. 

^  I.  Posting  from  the  Notes  Payable  Book.  Each  amount  entered  in  the  third  column  is  posted 
to  the  debit  side  of  the  creditor's  account,  written  on  the  same  line  with  it,  in  the  column  marked, 
"Personal  Account  Debited."  Amounts  in  the  first  and  second  columns  are  not  posted  until  the  end 
of  the  month.    At  that  time  the  three  columns  are  footed  and  proved  to  be  correct  in  the  same  manner 


246  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

as  the  notes  receivable  book,  and  then  ruled  with  single  and  double  red  lines.  The  total  of  the  first 
column  is  posted  to  the  credit  side  of  the  Notes  Payable  account  in  the  general  ledger;  the  total  of 
the  black  ink  entries  in  the  second  column  is  posted  to  the  debit  side  of  the  Interest  account,  and  the 
total  of  the  red  ink  entries  is  posted  to  the  credit  side;  the  total  of  the  third  column  is  posted  to  the 
debit  side  of  the  Purchases  Ledger  account. 

^2.  To  Prove  the  Notes  Payable  Book.  The  notes  payable  book  is  proved  in  the  same  manner 
as  the  notes  receivable  book,  and  the  record  of  notes  paid  is  entered  in  the  remarks  column  in  the 
same  manner. 

§  268.  Goods  Returned  Book.  The  object  of  this  book  is  to  keep  a  record  of  the  goods  re- 
turned by  customers.  There  are  various  reasons  why  a  customer  will  return  goods,  and  so  long  as 
this  reason  is  good,  it  is  best  practice  to  accept  the  goods  and  credit  the  customer's  account  with 
their  value.  A  credit  bill  is  sent  for  goods  when  they  are  received,  so  that  the  customer  will  know 
that  his  account  has  been  credited.  The  goods  are  checked  up  by  the  shipping  clerk  or  receiving 
clerk,  and  a  list  made  showing  the  items  contained  in  the  shipment.  If  the  freight  is  not  prepaid, 
the  amount  of  this  is  entered  so  that  it  may  be  deducted  from  his  credit.  The  list  is  then  given  to 
the  bookkeeper,  who  makes  the  extensions  from  the  prices  on  the  bill,  enters  the  items  in  the  goods 
returned  book,  and  sends  a  credit  bill.  Many  firms  use  the  same  list  made  out  by  the  shipping  or 
receiving  clerk  as  a  credit  bill.  When  this  is  the  case,  the  bookkeeper  enters  the  extensions  according 
to  the  prices  mentioned  on  the  bill  sent  when  the  goods  were  sold,  makes  a  record  in  the  goods  returned 
book,  and  mails  the  credit  bill  to  the  customer.  The  form  of  the  goods  returned  book  is  the  same 
as  the  sales  book,  shown  in  illustration  No.  33. 

^  I.  Posting  from  the  Goods  Returned  Book.  Each  amount  in  the  second  column  is  posted  to 
the  credit  side  of  the  person's  account  written  on  the  same  line  with  it,  this  account  being  in  the  sales 
ledger.  At  the  end  of  the  month,  the  book  is  ruled  and  footed  in  the  same  manner  as  the  sales  book, 
illustration  No.  33,  and  the  total  is  posted  to  the  debit  side  of  the  Sales  account,  and  to  the  credit  side 
of  the  Sales  Ledger  account  in  the  general  ledger. 

LEDGERS  TO  BE  USED. 

In  this  set  the  student  will  use  three  distinct  ledgers,  as  follows:  general  ledger,  purchases 
ledger  and  sales  ledger.  The  general  ledger  will  contain  controlling  accounts  which  will  show  the 
total  debits  and  credits  for  both  the  purchases  ledger  and  sales  ledger. 

§  269.  General  Ledger.  This  ledger  will  contain  all  accounts  except  those  with  creditors 
(persons  or  firms  from  whom  goods  are  purchased  on  time)  and  customers  (persons  or  firms  to  whom 
goods  are  sold  on  time),  and  one  account  (Purchases  Ledger)  which  will  represent  all  the  accounts 
in  the  purchases  ledger,  and  another  account  (Sales  Ledger)  which  will  represent  all  of  the  accounts 
in  the  sales  ledger.  The  ruling  is  the  same  as  that  shown  in  the  ledger  accounts  in  all  of  the 
illustrations  in  this  text.  The  Trial  Balance  is  made  from  the  general  ledger,  and  the  accounts  in 
the  other  ledgers  have  nothing  to  do  with  it. 

§  270.  Purchases  Ledger.  This  ledger  contains  an  account  with  each  person,  firm  or  corpora- 
tion from  whom  merchandise  or  other  property  is  purchased  on  time.  The  accounts  are  debited  and 
credited  in  the  same  manner  as  when  they  are  kept  in  one  general  ledger.  The  ruling  in  this  set  is 
different  from  that  in  the  general  ledger.  Illustration  No.  106  shows  the  form.  The  student  will 
note  that  this  contains  three  money  columns  ruled  in  the  center  of  the  page;  the  one  on  the  left 
is  for  debits  and  the  one  on  the  right  for  credits;  the  center  column  is  for  balances  at  the  time  the 
ledger  is  proved.  The  date  for  each  debit  item  is  entered  at  the  extreme  left,  and  for  each  credit 
item  at  the  extreme  right. 

This  ledger  is  proved  to  be  correct  by  comparing  the  total  of  the  various  balances  with  the  balance 
of  the  Purchases  Ledger  account  in  the  general  ledger.  It  is  not  proved  until  the  Trial  Balance  has 
been  made  and  is  in  balance.     The  amount  due  each   creditor  is  entered   in   the  balance  column. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


247 


(If  there  are  no  entries  on  the  debit  side,  the  balance  need  not  be  entered  in  the  Balance 
column;  if  there  is  only  one  entry  on  the  credit  side,  this  is  the  balance;  if  more  than  one,  the 
pencil  footings  show  the  balance.)  These  balances  are  transferred  to  a  separate  sheet  of  paper  or  to 
a  regular  trial  balance  book  and  added.  The  total  must  be  the  same  as  the  balance  of  the  Purchases 
Ledger  account  in  the  general  ledger.  If  it  is  not  the  same,  it  is  necessary  to  check  the  work  in 
this  ledger  in  the  same  manner  as  checking  to  discover  an  error  in  the  Trial  Balance. 


Date 


Ilem^ 


Fol 


J 


T)€d\\5 


Balance 


Credits 


t/FoI 


Ilem^ 


Date 


■^/ 


^1^ 


/ 
// 


T^J 


/^</ 


/J- 


/j^' 
^^/": 


2^ 


T'^J 


JT,^^^ 


^^^^Z. 


[^^. 


.^^^  /y- 


7/ 


/xT/.-z.'  y^o 


yj- 


NOTE. — The  address  of  each  person,  firm  or  corporation,  should  be  shown  on  the  account  in  the  ledger.  This  may 
be  omitted  if  local,  as  the  street  address  is  not  necessary. 

Illustration  No.  106.     A  Creditor's  Account. 

§  271.  Sales  Ledger.  This  ledger  contains  an  account  with  each  person  to  whom  the  business 
sells  merchandise  or  other  property  on  time.  It  is  ruled  similar  to  the  purchases  ledger,  and  the  col- 
umns are  used  in  the  same  manner.  This  ledger  is  proved  to  be  correct  by  comparing  the  total  due 
from  customers  with  the  balance  of  the  Sales  Ledger  account  in  the  general  ledger.  This  proof  is 
not  made  until  after  the  Trial  Balance  has  been  made  and  is  in  balance.  The  amount  due  from  each- 
customer  is  entered  in  the  balance  column.  (If  there  are  no  entries  on  the  credit  side,  the  balance  is 
not  entered  in  the  balance  column;  if  there  is  only  one  entry  on  the  debit  sid(  this  is  the  balance,  if 
more  than  one,  the  pencil  footings  show  the  balance.)  These  balances  are  transferred  to  a  sheet  of 
paper  or  trial  balance  book  and  added.  If  correct  the  total  will  be  the  same  as  the  difference  of  the 
Sales  Ledger  account,  as  explained.  If  the  totals  do  not  agree,  it  is  necessary  to  check  the  work  in 
this  ledger  in  the  same  manner  as  in  detecting  errors  in  the  Trial  Balance. 


AUXILIARY  BOOKS  USED  IN  THIS  SET. 


The  only  auxiliary  books  used  in  this  set  are  the  Stock  Certificate  Book,  Stock  Ledger,  and  Check 
Book.     The  use  of  these  is  explained  in  §§  272,  273,  and  274. 

§  272.  Stock  Certificate  Book.  This  is  made  up  of  blank  stock  certificates  and  stubs.  A 
reference  to  illustration  No.  107  is  sufificlent  explanation.  When  a  certificate  is  issued,  the  facts  are 
shown  on  the  stub.  These  are  transferred  to  the  stock  ledger,  where  an  account  is  kept  with  each 
stockholder.  The  facts  on  the  stub  must  be  the  same  as  those  on  the  certificate,  otherwise  the  record 
will  not  be  correct.  The  stub  of  the  certificate  might  be  considered  as  a  book  of  original  entry  for  the 
stock  ledger,  as  the  posting  is  done  from  this. 


248 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Certificate  9{o.  //^ 


For      —^^^r-f^^     f/iCj Sharts 


Issued  /i 


ssuea  to 


3}ate '^^^^t^  ^, 


J9^L^ 


Transferred  from 
'Date  .  ^f*'^     .^ /  9Z- 


^.^^^ 


y^ 


/^ 


^ 


Vecei^d  Certificate  &{o.   Z/' 

for    -—C^^^^-l^ Shares 


this    '=^  -day  of- 


iSL'f*^^^ 


(^M^y>^^^y 


'I  I ~ 1  * 

%  I  SHARES  $100.00  EACH 


^a../r 


g't^nri^  y^y 


Sl)i0  (ErrtifiPH  Th^t  ^M^^^t-?^ 

is  the  o-umer  of ^^^^^-^ 


^V^^g^^gg;^^ 


3F.  A.  Wlyitttfy  $c  (to. 


I*    the  Corporate  Seal  to  be  hereto  affixed  ai~ 


day  of- 


A.  2).  19^ 


Illustration  No.  107.     Stock  Certificate  Book. 


.Shares  of  the  Capital  Stock  of 


transferable  only  on  the  Books  of  the  Corporation  in  person  or  by  c/lttomey  on  surrender  of  this  Certificate.    | 
Jn  VitnrBa   wlfrrrof,  the  duly  aulhorixed  officers  of  this  Corporation  ha1>e  hereanto  subscribed  their  names  and  caused    * 


§  273.  Stock  Ledger.  The  object  of  this  book  is  to  contain  an  account  with  each  stockholder. 
His  account  is  credited  with  the  value  of  each  certificate  issued  and  charged  with  any  stock  sold.  An 
entry  must  be  made  for  each  certificate,  and  the  serial  number  of  the  certificate  should  be  shown  in 
the  explanation  column.  Illustration  No.  108  shows  the  correct  form.  The  entries  are  made  in  this 
book  from  the  stub  of  the  stock  certificate  book.  As  a  general  rule,  each  stockholder  is  required  to 
sign  the  stub,  thus  providing  a  receipt  for  the  stock.  If  each  account  in  the  stock  ledger  shows  the  number 
and  value  of  each  certificate,  the  auditor  can  very  readily  verify  the  correctness  of  this.  If  a  stock- 
holder sells  a  part  or  all  of  his  stock,  it  will  be  necessary  for  the  purchaser  to  have  the  stock  trans- 
ferred on  the  books,  otherwise  he  will  not  receive  any  dividend  on  it.  This  transfer  is  effected  by 
issuing  a  new  certificate.  If  the  stockholder  has  sold  all  of  his  stock,  the  old  certificate  is  canceled 
and  a  new  one  issued  in  favor  of  the  purchaser.  If  he  has  sold  only  a  part,  two  new  certificates  are 
issued,  one  to  him  for  the  stock  which  he  still  owns,  and  one  to  the  purchaser  for  the  stock  he  has  pur- 
chased. The  old  certificate  is  then  pasted  to  the  original  stub,  thus  providing  a  complete  record. 
If  the  stub  is  filled  out  correctly,  the  bookkeeper  can  post  the  entry  to  the  stock  ledger,  charging 
the  stockholder  who  has  sold  the  stock,  and  crediting  the  new  stockholder  for  the  number  and  value 
of  shares  purchased.  All  entries  in  the  stock  ledger  are  at  par  value,  and  the  price  paid  has  nothing 
to  do  with  the  entry  in  this  book. 

The  stock  ledger  is  proved  by  adding  the  par  value  of  each  stockholder's  stock.  This  must  equal 
the  Capital  Stock  account  in  the  general  ledger. 


Dale 

Cer. 

/Jo.of 
Shares 
ls5ued 

/Jo.  of 
Shares 
Trans. 

To  whom  Transferred  aTi3  olliGr  E^^lanaliorz^ 

X>etit 

Credii: 

^ 

^ 

/^ 

/A^ 

4^ 

y  4^^  (p 

y  y/'  <^  ^ 

/^^^  ^ 

/>-^i^^ 

^ 

^Z 

/^ 

/  ^  ^-'  ^^ 

Illustration  No.  108.     Stock  Ledger. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  249 

§  274.  Check  Book.  The  check  book  in  this  set  contains  three  checks  to  the  page.  It  is  sim- 
ilar to  the  one  used  in  the  preceding  set,  except  some  of  the  facts  shown  on  the  stub  and  the  voucher 
form  at  the  left-hand  end  of  the  check.  The  bank  account  is  kept  in  the  cash  book,  hence  it  is  not 
necessary  to  keep  it  on  the  check  stub.  After  the  stub  has  been  filled  out  and  the  check  written, 
the  voucher  space  at  the  left-hand  end  of  the  check  is  filled  in.  This  must  show  the  nature  of 
the  payment,  that  is,  the  reason  why  the  check  is  written.  When  this  check  is  received  by  the 
person  to  whom  it  is  sent  he  will  know  at  once  the  reason  why  it  has  been  issued.  If  there  is  any 
error  he  will  return  it  for  correction.  His  acceptance  of  the  check  and  the  statements  mentioned 
in  the  voucher  form  constitutes  a  receipt.  The  endorsement  on  the  back  is  evidence  of  acceptance. 
This  is  a  very  popular  form  of  the  voucher  ch^ck,  and  is  rapidly  taking  the  place  of  the  large 
voucher  form  formerly  used. 

§  275.  Power  of  Attorney.  The  power  of  attorney  is  a  contract  which  authorizes  one  person 
to  act  as  agent  for  another.  This  contract  should  always  be  in  writing,  and  if  it  is  for  a  longer  period 
than  one  year  should  be  recorded  in  the  office  of  the  proper  county  official.  No  person  should  sign 
the  name  of  another  person  to  any  contract,  without  having  a  written  power  of  attorney  showing  his 
authority.  While  it  is  not  necessary  for  the  bookkeeper  for  an  individual,  partnership  or  corpora- 
tion to  have  a  written  power  of  attorney  authorizing  him  to  sign  papers  received  in  everyday  busi- 
ness, yet  it  is  best  policy  for  him  to  have  this,  as  it  protects  him  in  case  of  dispute.  This  is  usually 
true  with  a  corporation,  as  no  one  is  authorized  to  transact  business  for  a  corporation,  except  by 
authority  of  the  board  of  directors.  The  power  of  attorney  may  be  given  by  authority  of  the  board 
of  directors  at  a  regular  meeting  or  a  special  meeting.  If  the  authority  is  granted  at  a  meeting  and 
properly  recorded  in  the  minute  book,  the  bookkeeper  is  protected,  even  though  he  does  not  have 
the  written  power  of  attorney.  However,  it  is  really  better  for  him  to  have  this,  and  he  should  al- 
ways insist  on  it,  especially  where  he  has  to  sign  any  commercial  paper  that  binds  the  corporation. 

§  276.  Trial  Balance,  July  31st.  This  Trial  Balance  is  made  from  the  general  ledger  and  in- 
cludes all  of  the  accounts  in  this  book.  It  will  not  contain  any  accounts  with  creditors  or  customers, 
and  the  accounts  in  the  purchases  ledger  and  sales  ledger  will  not  affect  it  in  any  way.  After  the 
Trial  Balance  has  been  proved  to  be  correct,  the  purchases  ledger  is  proved  by  comparing  the  total 
amount  due  to  creditors  with  the  balance  of  the  Purchases  Ledger  account.  The  sales  ledger  is 
proved  to  be  correct  by  comparing  the  total  amount  due  from  customers  with  the  balance  of  the 
Sales  Ledger  account.  The  list  of  creditors  and  customers  may  be  made  in  the  trial  balance  book 
direct,  and  thus  avoid  time  and  possible  errors  in  copying.  In  an  office  where  an  adding  machine  is 
used,  the  bookkeeper  seldom  makes  a  list  of  customers  and  creditors  in  the  trial  balance  book,  but 
preserves  the  record  made  on  the  adding  machine  until  the  next  Trial  Balance  is  proved.  In  the 
schoolroom  work  it  is  best  for  the  student  to  make  a  copy  of  the  balances  of  creditor's  and  customer's 
accounts  for  reference  in  taking  the  next  Trial  Balance. 


250 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


QUESTIONS. 


1.  Define  the  Journal.     (§  261.)  *  17. 

2.  When    controlling    accounts    are    kept    in 

the  general  ledger,  why  is  it  necessary 
to  have  special  columns  in  the  journal? 

3.  Describe    the    journal    used    in    this    set. 

(§261.)  18. 

4.  Describe  the  purchases  book  used  in  this  19. 

set,  and  give  some  of  its  advantages 
over  the  one  used  in  the  preceding  set, 
(§  262.) 

5.  Define   the   sales  book  used   in   this   set,  20. 

and  state  some  of  its  advantages  over  21. 

the    one    used    in    the    preceding    set. 

(§  263.)  22. 

6.  Define  the  cash  book.     (§  264.)  23. 

7.  What    does   the    debit    side    show?      The  24. 

credit  side?     (§  264.) 

8.  Describe  the  form  used  in  this  set.    (§  264.)  25, 

9.  Name  the  special  columns  on   the  debit 

side  and  define  the  use  of  each.     (§  264.)  26. 

10.  Name  the  special  columns  on  the  credit 

side  and  define  the  use  of  each.     (§  264.)  27. 

11.  What  is  the  petty  cash  book?     (§  265.)  28. 

12.  Define  the  imprest  fund.      (§  265.)  29. 

13.  Name  some  of  the  advantages  in  keeping 

this.     (§  265.)  30. 

14.  When  are  the  proper  accounts  debited  for 

pavments     from     the     imprest     fund?  31. 

(§265.) 
!5.     In  proving  cash,  is  the  full  amount  or  the  32. 

actual  amount  on  hand  used?     (§  265.) 
16.     Give  reasons  for  your  answer.  33. 


When  the  notes  receivable  book  is  used 
as  a  book  of  original  entry,  is  it  neces- 
sary to  enter  notes  received  by  us  or 
drafts  drawn  by  us  in  the  journal? 
(§  266.) 

Give  a  reason  for  your  answer  in  No.  17. 

When  the  notes  payable  book  is  used  as 
a  book  of  original  entry,  is  it  necessary 
to  enter  notes  signed  or  drafts  accepted 
by  the  business  in  the  journal?    (§  267.) 

Give  reasons  for  your  answer  in  No.   19. 

What  is  the  use  of  the  goods  returned 
book?     (§  268.) 

Name  the  three  ledgers  used  in  this  set. 

Define  the  general  ledger.     (§  269.) 

Define  the  purchases  ledger  and  explain 
how  it  is  proved.     (§  270.) 

Define  the  sales  ledger  and  explain  how 
it  is  proved.      (§  271.) 

Name  some  of  the  advantages  in  keeping 
these  three  ledgers.      (§  271.) 

Define  the  stock  certificate  book.     (§  272.) 

Define  the  stock  ledger.      (§  273.) 

How  is  the  stock  ledger  proved  to  be  cor- 
rect?    (§  273.) 

Describe  the  check  book  used  in  this  set. 

(§  274-) 
What    is    the    advantage    of    the    special 

voucher  form  on  the  end?     (§  274.) 
Why  is  it  best  for  the  bookkeeper  to  keep 

a  copy  of  each  deposit  made? 
Define  a  Power  of  Attorney.     (§  275.) 


EXERCISES  IN  JOURNAL  ENTRIES  AND  STATEMENTS— CORPORATIONS. 


EXERCISE  No.  75.  i.  C.  W.  Miller,  D.  L.  Monroe,  C.  W.  Richards  and  Julius  Robinson 
form  a  corporation  for  the  purpose  of  engaging  in  the  manufacturing  of  novelties.  The  capital  is 
$10,000.00,  each  subscribing  and  paying  for  an  equal  number  of  shares. 

Make  the  required  journal  entry.  Debit  Cash  for  the  money  received  and  credit  Capital  Stock 
for  the  $10,000.00.  Each  person  would  be  credited  in  the  stock  ledger,  the  posting  being  made  from 
the  stub  of  the  stock  certificate. 

2.  A.,  B.,  C,  D.  and  E.  obtain  a  charter  incorporating  the  Central  Machine  Co.  The  capital 
stock  is  $25,000.00,  500  shares  valued  at  $50.00  each.  A.  subscribes  and  pays  for  125  shares;  B. 
subscribes  for  75  shares,  paying  for  50,  balance  to  be  paid  in  30  days;  C.  subscribes  and  pays  for  65 
shares;  D.  subscribes  for  150  shares,  paying  cash  for  lOO  and  executing  his  90-day  note  for  the 
other  50;  E.  subscribes  and  pays  for  50  shares. 

Make  the  required  journal  entry.  Debit  Cash  for  the  money  received,  Notes  Receivable  for  the 
note,  B.  for  the  amount  he  owes,  and  credit  Capital  Stock.    No  entry  is  made  for  the  unsold  stock. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  251 

3.  L.  C.  Houk  owns  and  operates  a  machine  shop.  He  desires  to  consohdate  the  business 
with  that  of  Burrows  Bros.  The  new  firm  is  incorporated,  a  charter  having  been  obtained.  The 
following  are  the  assets  of  Mr.  Houk:  cash,  $487.65;  machinery  valued  at  $3,989.55;  accounts  due 
from  customers,  $769.80;  notes  due  him,  $614.27;  office  equipment,  $450.00.  He  owes  an  account 
of  $947.85,  and  a  note  for  $1 ,000.00,  with  accumulated  interest,  $14.36.  His  Capital  Account  stands  cred- 
ited with  $4,325.97.  Burrows  Bros.'  (J,  W.,  C.  J.,  M.  L.,  and  N.  O.,  equal  partners)  books,  after  being 
closed,  show  the  following:  Cash,  Dr.  $1,587.65;  Machinery,  Dr.  $9,227.63;  Real  Estate,  Dr.  $6,- 
•000.00;  Office  Equipment,  Dr.  $875.00;  Delivery  Equipment,  Dr.  $250.00;  Accounts  Receivable, 
Dr.  $7,691.82;  Notes  Receivable,  Dr.  $1,846.75;  Accounts  Payable,  Cr.  $2,763.19;  Notes  Payable, 
Cr.  $1,500.00;  Burrows  Bros.,  Capital,  Cr.  $22,984.91.  Three  percent  is  to  be  deducted  from  accounts 
due  each  firm  for  possible  loss  by  failure  to  collect.     (Credit  Reserve  for  Bad  Debts.) 

It  is  agreed  that  Burrows  Bros,  are  to  be  allowed  a  good  will  of  $2,015.09  and  Mr.  Houk  $674.03, 
for  which  they  are  to  have  stock.  The  capital  stock  is  to  be  $30,000.00,  each  person  having  as  many 
shares  as  his  interest  in  the  old  business  compares  with  the  new  capital. 

You,  as  bookkeeper  for  the  new  corporation,  are  to  make  the  required  journal  entry,  opening 
up  a  new  set  of  books. 

NOTE. — As  the  books  of  both  concerns  are  in  balance,  combine  the  accounts  that  are  similar.  Debit  Good  Will  for 
the  allowance  for  good  will,  and  credit  Capital  Stock  for  the  capital. 

4.  C.  L.  Loyd,  N.  C.  Hines,  D.  W.  Buckner,  R.  L.  Falkner  and  C.  W.  Elliott  obtain  a  charter 
for  the  Hawkins  Valley  Railroad.  The  capital  stock  is  to  be  $500,000.00,  (5,000  shares,  par  value 
$100.00  per  share)  to  be  subscribed  for  and  paid  in  installments  of  at  least  10  per  cent  per  month. 
They  wish  to  have  the  books  opened  and  hand  the  bookkeeper  the  following  memorandum:  Sub- 
scription list:  Each  incorporator  subscribes  for  400  shares  and  pays  $1,000.00.  C.  J.  Brabson,  200 
shares,  $2,000.00  paid;  Robert  Howell,  150  shares,  $3,500.00  paid;  S.  C.  Bostwick,  250  shares, 
$2,500.00  paid;  J.  B.  Falkner,  125  shares,  $2,000.00  paid;  D.D.Eaton,  200  shares,  $3,000.00  paid; 
J.  W.  Brown,  15  shares,  $1,500.00  paid;  R.  W.  Wilson,  90  shares,  $1,000.00  paid;  Hawkins  County, 
500  shares,  paid  by  accepting  1,000  shares  Union  Railroad  Co.  stock;  J.  A.  Puterbaugh,  50  shares, 
$1,000.00  paid;  C.  W.  Gray,  Al.  H.  Cooper,  C.  W.  Catlett,  W.  K.  Badgett,  S.  H.  Luttrell  and 
Martha  Dobson,  each  25  shares,  with  10  per  cent  payments.  Sold  the  Union  Railroad  Co.  stock  for 
$45,000.00  in  cash.  The  cash  is  deposited  in  the  bank  in  the  name  of  the  corporation.  The  following 
checks  have  been  issued:  $525.00  for  obtaining  charter  (General  Expense);  $2,650.00  for  right  of 
way;  office  rent,  $50.00  (General  Expense);  stationery,  $12.50  (General  Expense);  circulars  for  adver- 
tising, $147.50;  telegrams,  $6.50  (General  Expense);  attorney's  fees,  $175.00  (General  Expense). 

As  bookkeeper,  make  the  required  opening  entry,  using  the  cash  book. 

NOTE. — Some  bookkeepers  do  not  credit  the  Capital  Stock  account  with  the  value  of  stock  subscribed  for  until  all 
ol  it  has  been  paid.  Others  credit  Capital  Stock  with  all  money  received  in  payment  for  stock.  The  same  results  are 
obtained  after  all  the  stock  has  been  paid  for.  In  this  case  credit  Capital  Stock  for  the  amount  each  person  paid.  If  you 
were  to  continue  the  work,  an  installment  book  would  be  necessary,  so  that  the  amount  due  from  subscribers  might  be 
ascertained.  Enter  in  the  cash  book  "Capital  Stock,  C.  L.  Loyd,  $1000.00",  etc.  Capital  Stock  is  credited  in  the  general 
ledger  and  each  individual  in  the  installment  ledger.  Each  person  is  charged  in  the  installment  ledger  with  the  number 
of  share?  for  which  he  subscribed,  from  the  subscription  list,  hence  no  entry  is  made  on  the  journal. 

5.  C.  A.  Blosser  and  L.  B.  Audigier,  as  equal  partners,  are  engaged  in  the  lumber  business, 
opefating  a  saw  mill  and  shop.  Their  books,  after  being  closed  June  30th,  show  the  following:  C. 
A.  Blosser,  Capital,  Cr.  $17,272.50;  L.  B.  Audigier,  Capital,  Cr.  $17,216.50;  Lumber,  Dr.  $9,641.87; 
Planing  Mill,  Dr.  $7,612.00;  Machinery,  Dr.  $8,450.00;  Cash,  Dr.  $3,471.65;  Notes  Receivable,  Dr. 
$1,675.82;  Notes  Payable,  Cr.  $1,500.00;  Office  Equipment,  Dr.  $350.00;  Reserve  for  Depreciation 
of  Office  Equipment,  Cr.  $35.00;  Accounts  Receivable,  Dr.  $9,681.27;  Accounts  Payable,  Cr.  $4858.61. 

They  incorporate  with  a  capital  stock  of  $60,000.00,  1,200  shares  at  $50.00  each.  Each  of  the 
partners  received  $18,000.00  worth  of  stock,  the  balance  being  subscribed  for  as  follows:  J.  C.  New- 
man, 100  shares,  paid;  D.  W.  Bowen,  25  shares,  paid;  A.  C.  Kienzle,  50  shares,  paid  $600.00,  balance 
on  demand;  D.  D.  Anderson,  75  shares,  paid  cash  one-half,  and  gave  his  note,  due  in  60  days,  for  the 


252  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

balance  ;0.  W.  Brown,  lOO  shares,  paid  by  our  accepting  timber  on  sections  33  and  34  in  township  6 
range  5,  east;  J.  J.  Nagel,  100  shares,  paid;  30  shares  not  subscribed  for.  Make  the  required  opening 
entry,  using  the  journal  and  cash  book. 

6.  The  bookkeeper  for  the  Magill  Hardware  Co.  makes  his  annual  statement  of  the  business 
from  the  following  facts: 

TRIAL  BALANCE:  Capital  Stock,  Cr.  $60,000.00;  Cash,  Dr.  $14,400.00;  Sales,  Dr.  $318.56; 
Cr.  $81,994.37;  Purchases,  Dr.  $90,255.18,  Cr.  $518.60;  Inventory,  Dr.  $26,782.14;  Sales  Discount, 
Dr.  $882.46,  Cr  $21.50;  Purchases  Discount,  Dr.  $32.75,  Cr.  $1,614.92;  Freight  In,  Dr.  $814.70; 
Real  Estate,  Dr.  $1,600.00;  Real  Estate  Expense  and  Revenue,  Dr.  $879.45,  Cr.  $121.65;  Insurance, 
Dr.  $250.00;  Office  Equipment,  Dr.  $729.46;  Reserve  for  Depreciation  of  Office  Equipment,  Cr. 
$72.94;  General  Administrative  Expense,  Dr.  $2,916.50,  Cr.  $135.50;  Salaries  in  Selling  Department, 
Dr.  $2,529.40;  Freight  Out,  Dr.  $82.50;  Traveling  Expense,  Dr.  $2,391.85;  Advertising,  Dr.  $1  654.42; 
Delivery  Expense,  Dr.  $299.08;  Interest,  Dr.  $37.52,  Cr.  $126.48;  Notes  Receivable,  Dr.  $9,614.72; 
Notes  Payable,  Cr.  $19,021.76;  Accounts  Receivable,  Dr.  $20,708.69;  Reserve  for  Bad  Debts,  Cr. 
$207.07;  Accounts  Payable,  Cr.  $13,798.94;  Profit  and  Loss,  Dr.  $316.50;  Sundry  Resource  Inven- 
tories, Dr.  $365.50;  Sundry  Liability  Inventories,  Cr.  $227.65;  Inventory,  salable  merchandise  on 
hand,  $52,763.49. 

The  balance  of  the  Real  Estate  Expense  and  Revenue  account  shows  the  cost  of  maintaining 
the  building,  and  is  considered  a  part  of  the  general  administrative  expense.  75%  of  the  profit  is 
distributed  among  the  stockholders,  and  the  other  25%  credited  to  the  Surplus  account. 

Ascertain  the  net  gain  and  the  amount  of  dividend  the  following  stockholders  will  receive  (shares, 
$100.00  each): 

A,  75  shares;  B,  125  shares;  C,  no  shares;  D,  85  shares;  E,  25  shares;  F,  60  shares;  G,  40  shares; 
H,  35  shares;  I,  20  shares;  J,  25  shares. 

7.  The  Davis  Grocery  Co.  (Incorporated)  owe  Warren  &  Madden  an  account  of  $3,681.75, 
subject  to  3  per  cent  discount.  They  settle  by  transferring  20  shares  (par  value,  $100.00)  of  the 
capital  stock  at  $110.00  and  check  for  balance.  Make  the  required  entries  for  Davis  Grocery  Co. 
and  Warren  &  Madden. 

8.  W.  G.  Darling  subscribes  for  10  shares  of  the  capital  stock  of  the  Boyd  Manufacturing  Co. 
at  $100.00  per  share.  He  pays  $250.00,  and  gives  his  60-day  note  for  balance,  attaching  the  certifi- 
cate of  stock  as  collateral  security.  He  died  before  paying  the  note.  His  estate  proves  insolvent 
and  his  administrator  settles  by  the  corporation  refunding  one-half  the  amount  paid.  What  entry 
is  made  on  the  books  of  the  corporation  for  the  last  transaction? 

NOTE. — Had  the  estate  been  solvent,  the  corporation  would  have  collected  from  it  the  balance  due  them,  then  issued 
the  stock.  As  it  is  not,  the  above  settlement  is  the  one  made.  It  is  hardly  possible  that  the  court  would  allow  them  to 
retain  the  $250.00  because  the  other  $750.00  had  not  been  paid. 

Treasury  Stock  should  be  debited  for  the  face  value  of  the  stock.  The  student  must  use  his 
own  judgment  regarding  the  credits. 

9.  C.  W.  Green  subscribes  for  15  shares  of  the  Peoples'  Telephone  Co.  stock,  at  $50.00  per 
share.  He  pays  $100.00,  which  is  credited  to  his  account,  this  being  charged  with  the  value  of  the 
stock  he  bought.  He  fails  to  pay  the  balance,  and  suit  is  brought.  Judgment  is  obtained  for  $687.96, 
being  the  $650.00  he  owes,  court  costs,  $26.40,  and  interest,  $11.56.  A  check  is  given  the  attorney 
covering  costs  and  5  per  cent  collection  fees.  Make  the  required  journal  entry  for  each  transaction. 

10.  W.  W.  Collett  is  appointed  receiver  for  the  National  Printing  Co.  He  finds  the  books 
in  balance,  the  accounts  standing  as  follows:  Cash,  Dr.  $129.64;  Capital  Stock,  Cr.  $30,000.00;  Print- 
ing, Dr.  $61,429.65,  Cr.  $64,381.18;  Printing  Machinery,  Dr.  $19,476.28;  Bindery,  Dr.  $18,621.11, 
Cr.  $22,927.46;  Bindery  Machinery,  Dr.  $14,621.80;  Expense,  Dr.  $1,416.25;  Salaries,  Dr.  $6,463.95; 
Office  Equipment,  Dr.  $650.00;  Rent,  Dr.  $1,375.00;  Interest,  Dr.  $465.82,  Cr.  $10.36;  Notes  Paya- 
ble, Cr.  $10,000.00;  Notes  Receivable,  Dr.  $426.90;  Accounts  Receivable,  Dr.  $13,681.19;  Accounts 
Payable  as  follows:    Union  Paper  Co..  $4,621.95;  U.  S.  Envelope  Co.,  $1,416.95;  American  Envelope 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  253 

Co.,  $671.25;  L.  A.  Jones  Paper  Co.,  $2,961.54;  Watertown  Manufacturing  Co.,  $1,411.95;  Eagle 
Paper  Co.,  $354-95- 

A  careful  inventory  results  in  the  following:  Printing,  paper  and  unfinished  work,  $3,281.65; 
Printing  Machinery,  $16,000.00;  Bindery,  stock  and  unfinished  work,  $2,181.68;  Bindery  Machinery, 
$10,000.00;  Expense,  stationery,  etc.,  on  hand,  $125.00;  Office  Equipment,  $500.00;  Rent,  one  mpnth 
due  and  unpaid,  $125.00. 

He  makes  the  statements  and  finds  the  net  loss  to  be  $5,237.53.  Make  the  Financial,  and  Profit 
and  Loss  statements  to  ascertain  if  this  is  correct.  He  sells  the  Printing  and  Bindery  Machinery, 
also  all  stock  and  unfinished  work  for  inventory  price,  less  15  percent,  receiving  one-third  cash,  one- 
third  note  due  in  60  days,  and  balance  note  due  in  90  days.  He  also  collects  $1,500.00  from  Accounts 
Receivable.  He  sends  each  creditor  a  check  for  45  per  cent  of  his  claim.  (The  creditors  are  those 
persons  whom  the  corporation  owes,  and  the  bank  holding  the  notes  shown  by  the  Notes  Payable 
account.)     What  amount  will  each  receive? 

II.  W.  D.  Burkhart  is  conducting  a  restaurant  at  Fifth  and  Cedar  Streets  under  the  name  of 
"The  Home  Restaurant."  The  business  is  incorporated  with  a  capital  stock  of  $2,500.00,  consisting 
of  250  shares  at  $10.00  per  share.  W.  D.  Burkhart  owns  130  shares,  H.  F.  Ritter  30  shares,  C.  H. 
Harvey  50  shares,  C.  L.  Robinson  20  shares,  and  J.  H.  Bowen  20  shares.  The  business  is  unable  to 
meet  its  obligations,  and  W.  G.  Brownfield  is  appointed  receiver.  The  books  are  in  balance  and  show 
the  following: 

Capital  Stock  Cr.,  $2,500.00;  Cash,  Dr.  $129.65;  Fixtures,  Dr.  $3,256.80;  Reserve  for  Deprecia- 
tion of  Fixtures,  Cr.  $325.68;  Cafe  Service,  Dr.  $9,681.37,  Cr.  $10,527.64;  Expense,  Dr.  $1,652.40; 
Advertising,  Dr.  $534.82;  Mason  Bros.,  Cr.  $279.10;  W.  H.  Busby  &  Co.,  Cr.  $298.42;  Peoples'  Gro- 
cery Co.,  Cr.  $326.45;  Owens  &  Co.,  Cr.  $126.50;  Cash  Grocery  Co.,  Cr.  $371.25;  Notes  Payable  (City 
National  Bank)  $500.00.  A  careful  inventory  shows  supplies  consisting  of  meat,  lard,  sugar,  coffee, 
etc.,  on  hand,  $287.36;  the  business  owes  employees  $236.50;  rent,  $75.00. 

The  creditors  agree  for  the  receiver  to  conduct  the  business  until  it  can  be  sold  as  a  going  concern. 
Mr.  Brownfield  does  this  for  one  week  and  sells  the  business,  consisting  of  fixtures,  good  will,  etc.,  for 
$2,600.00,  (the  supplies  on  hand  have  all  been  consumed),  and  agrees  to  pay  all  outstanding  obligations. 
During  the  week,  the  cash  receipts  were  $726.42;  payments  were  $431.87,  which  does  not  include  the 
amount  due  employees  at  the  time  he  took  charge  as  receiver.  After  collecting  for  the  sale,  he  pays 
all  outstanding  obligations,  including  personal  accounts,  notes  payable,  amounts  due  employees, 
himself  $200.00,  which  is  the  fee  allowed  by  the  court,  and  $36.85  court  cost.  He  submits  to  the  court 
a  detailed  statement  showing  the  condition  of  the  business  at  the  time  he  assumes  charge  of  it,  and 
a  statement,  made  after  all  of  the  debts  had  been  paid.  The  court  orders  the  remaining  cash  distrib- 
uted among  the  stockholders  in  proportion  to  the  number  of  shares  owned. 

You  will  do  the  work  done  by  Mr.  Brownfield  as  receiver.  Use  your  own  judgment  as  to  the  best 
form  of  statements  to  submit  to  the  court.  You  will  not  need  to  show  the  required  entries  for  the  re- 
ceipts and  payments  of  cash,  but  your  final  result  must  be  correct. 


254  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


AUGUST. 

A  continuation  of  the  July  business  introducing  the  Branch  Store  account,  Agency  account, 
the  use  of  the  accounts  explained  in  July  and  the  preceding  sets,  and  other  important  information 
necessary  for  the  successful  record  of  business  transactions. 

BRANCH  STORE  ACCOUNT. 

§  277.  The  Object  of  this  Account  is  to  keep  a  record  of  the  transactions  which  affect  a  branch 
store.  The  branch  store  may  be  conducted  in  the  same  city  or  another  city  and  under  the  name  of 
the  general  store  or  under  some  special  name.  The  account  may  be  designated  on  the  books  by 
"Branch  Store",  the  name  under  which  the  store  is  conducted,  or  any  other  descriptive  name  de- 
sired. Thus,  the  name  of  the  account  might  be  "Branch  Store",  "Main  Street  Store",  "Dallas 
Store,  No.  i",  "South  Bend  Store,  No.  27",  etc. 

The  method  of  conducting  this  store  and  the  desire  of  those  interested  determines  largely  the 
method  of  keeping  this  account.  If  a  special  set  of  books  are  kept  at  the  branch  store  and  all  trans- 
actions entered  in  these,  the  bookkeeper  of  the  main  store  would  keep  only  one  account  with  the 
branch  store.  If  all  the  accounts  of  the  branch  store  are  to  be  kept  by  the  bookkeeper  of  the  main 
store,  he  should  have  the  same  accounts  with  the  branch  store  as  he  has  with  the  main  store;  thus 
if  he  is  keeping  all  the  accounts  with  the  branch  store,  he  would  have  to  have  an  account  on  his  ledger 
with  Purchases,  Sales,  Inventories,  Fixed  Investments,  General  Expense,  Selling  Expense,  etc.  If 
a  special  set  of  books  are  kept  in  the  branch  store,  the  one  account  kept  by  the  bookkeeper  for  the 
main  store  will  be  debited  for  the  value  of  all  property  on  hand  at  the  beginning  of  the  business,  with 
all  property  transferred  to  the  branch  store  or  purchased  for  it,  with  all  expenses  paid,  and  credited 
with  the  sales.  This  account  must  be  kept  so  that  the  books  of  the  branch  store  can  be  proved  to 
be  correct  by  the  result  of  this  account. 

As  stated,  the  nature  of  the  business  and  desire  of  those  interested  has  more  to  do  with  the  best 
method  of  keeping  accounts  with  branch  stores,  and  while  either  of  the  above  methods  are  correct 
and  may  be  used,  yet  conditions  may  be  such  that  it  is  necessary  to  intermingle  the  two  plans. 

The  following  debits  and  credits  are  given  to  apply  when  a  special  set  of  books  are  kept  in  the 
branch  store,  and  only  one  account  is  kept  by  the  bookkeeper  at  the  main  store,  all  obligations 
being  paid  by  the  main  store. 

Debit  the  Branch  Store  Account:  Credit  the  Branch  Store  Account: 

^  I.     For  all  property  on  hand  which  may  be  ^6.     For  all  amounts  received  from  the  sale 

fixed  investments,  merchandise  for  sale,  of   goods,    which   usually   include   only 

cash,   personal   accounts,    notes,   etc.  cash,  as  the  credit  sales  are  not  reported 

^  2.     For     all     property     transferred     to     the  until  collected, 

branch  store  out  of  the  main  store. 

^  3.     For  all  property  purchased  from  others 
for  use  in  the  branch  store. 

^  4.     For  all  amounts  paid  employees  in   the 
branch  store. 

^  5.     For  all  amounts  paid  for  other  expenses. 

^  7.  The  Difference  of  the  Branch  Store  Account,  at  the  close  of  the  fiscal  period,  after  the 
proper  entry  has  been  made  for  the  value  of  any  property  on  hand,  shows  the  profit  or  loss  made  by- 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


255 


conducting  the  branch  store.  If  the  debit  side  is  the  larger,  it  is  a  loss;  if  the  credit  side,  a  profit.  It 
appears  on  the  Profit  and  Loss  statement,  being  listed  after  the  gross  trading  profit,  if  it  shows  a 
profit;  and  after  the  expense  accounts,  if  it  shows  a  loss. 

^8.  To  Close  the  Branch  Store  Account.  This  account  is  closed  by  the  journal  entry  which 
closes  the  profit  or  loss  accounts  into  the  Profit  and  Loss  account  at  the  end  of  the  fiscal  period.  When 
this  entry  is  posted,  the  account  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink. 

NOTE. — If  desired,  the  bookkeeper  in  the  main  store  may  keep  the  same  accounts  with  the  branch  store  as  he  does 
with  the  purchases  and  sales  of  merchandise.  This  is  not  bad  practice,  and  if  the  purchases,  sales,  etc.,  are  very  extensive, 
it  is  the  best  plan.  Since  a  branch  store  would  be  conducted  only  by  a  firm  that  was  doing  an  extensive  business,  the 
conditions  under  which  the  store  is  conducted  must  govern  the  method  of  keeping  the  account.  The  account  is  illustrated 
here,  that  the  student  may  understand,  at  least,  one  method  of  keeping  accounts  with  branch  stores. 


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Illustration  No.  109.     Branch  Store  Account. 


AGENCY  ACCOUNT 


§  278.  The  Object  of  this  Account  as  explained  here  is  to  show  a  record  of  the  transactions  of 
the  agent  with  the  principal,  when  the  agent  is  selling  merchandise  belonging  to  the  principal  on  a 
commission  basis,  and  assuming  all  responsibility  for  credit  sales.  The  method  of  keeping  the  agency 
account  must  be  determined  by  the  nature  of  the  contract  betwen  the  agent  and  principal,  and  would 
of  necessity  vary  with  the  conditions  in  the  contract.  An  agent  is  one  who  acts  for  another,  and 
the  principal  is  the  one  for  whom  the  agent  is  acting.  The  meaning  of  the  word  "Agent"  here,  is 
one  who  sells  goods  for  another  on  a  commission  basis,  and  the  meaning  of  "Principal"  is  the  one 
who  owns  the  goods  that  are  being  sold  by  the  agent.     The  student  must  not  confuse  the  explana- 


256  20 TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


tion  given  here  with  an  account  that  might  be  kept  under  entirely  different  conditions,  and  is  cau- 
tioned to  study  the  conditions  in  the  contract  of  the  agent  and  principal,  before  determining  the 
method  of  keeping  the  account.  The  following  debits  and  credits  apply  to  the  account  kept  by  the 
agent,  when  he  sells  the  goods  on  commission  and  assumes  all  responsibility  for  credit  sales. 

Debit  the  Principal:  Credit  the  Principal: 

•[  I.     For    all    cash    paid    him    on    account    of  ^4.     For  all  cash  sales  of  his  goods, 

goods  sold.  ^  5.     For  all  credit  sales  of  his  goods. 

^  2.  For  all  drafts  which  he  may  draw  and 
accepted  by  us,  or  notes  which  we  give" 
him  to  apply  on  account  of  his  goods 
sold. 

^  3.  For  all  commission  on  sales  as  per  con- 
tract. 

^6.  The  Difference  of  this  Account,  before  the  entry  for  the  commission  has  been  made, 
shows  the  amount  due  the  principal  for  goods  sold.  At  the  close  of  the  fiscal  period,  after  the  proper 
entry  has  been  made  for  the  commission  due  on  sales,  the  difference  shows  the  net  amount  due  the 
principal.  It  is  a  liability  and  must  appear  on  the  Financial  statement  among  the  liabilities,  being 
listed  next  in  order  after  accounts  payable. 

^7.  To  Close  the  Agency  Account.  This  account  is  closed  in  the  same  manner  as  a  personal 
account.  If  it  balances,  it  is  ruled  with  single  and  double  red  lines  and  footed  in  black  ink.  If  it 
is  made  to  balance,  the  difference  is  entered  on  the  debit  side  in  red  ink,  the  account  ruled  and 
footed,  and  the  balance  brought  down  or  transferred  to  a  new  page  on  the  credit  side  in  black  ink. 

NOTE. — -The  account  kept  by  the  principal  would  differ  from  that  kept  by  the  agent.  The  principal  would  charge 
the  agent  with  all  goods  shipped  to  him  and  credit  him  with  all  returns.  As  a  general  rule,  the  selling  price  is  fixed 
by  the  principal,  hence  the  account  on  the  principal's  books  would  show  the  value  of  his  goods  on  hand  with  the  agent. 
When  the  agent  has  disposed  of  all  of  the  goods,  the  Agency  account  would  balance  on  the  books  of  the  principal.  The 
commission  paid  the  agent  for  selling  the  goods  w  )uld  be  charged  to  a  Commission  account.  The  profit  on  the  sales  would 
be  shown  by  the  accounts  with  Merchandise. 

§  279.  Analytical  Statement.  The  Financial,  Profit  and  Loss,  and  Trading  statements  must 
show  the  true  condition  of  the  business  at  the  close  of  the  fiscal  period.  Sometimes  it  is  not  practical 
to  show  all  the  necessary  facts  on  the  statement,  and  when  this  is  the  case,  a  separate  analytical 
statement  is  made  up  showing  these  facts  in  detail.  On  the  Financial  statement,  the  Notes  Receiv- 
able account  shows  the  value  of  notes  on  hand,  but  does  not  show  the  amount  of  each  note,  the  date 
when  it  is  due,  the  signatures  of  the  parties  who  are  responsible  for  the  payment,  and  other  facts 
that  really  should  be  shown  by  the  statement.  The  Accounts  Receivable  account  represents  the 
total  amount  due  from  customers,  but  does  not  show  the  amount  owed  by  each  customer.  These 
should  be  shown  on  an  analytical  statement,  which  should  show  the  name  of  each  person,  the  terms 
and  the  amount  due.  The  General  Administrative  Expense  account  shows  the  amount  of  general 
administrative  expense  for  the  fiscal  period,  but  does  not  show  the  various  items  that  represent  this. 

A  separate  analytical  statement  should  be  made  showing  as  nearly  as  possible  the  various  ex- 
penses and  the  amount  of  each,  such  as  light,  heat,  salaries,  stationery,  stamps,  etc.  In  the  same  way, 
the  Selling  Expense  account  should  be  explained  by  a  statement  setting  forth  the  various  amounts 
paid  for  salaries,  house  employees,  traveling  men,  delivery  expense,  etc.  Sometimes  these  are  repre- 
sented by  accounts  on  the  ledger,  in  which  case  the  facts  are  shown  by  the  account;  but  it  may  be 
that  those  interested  will  want  a  more  detailed  statement  of  the  different  expenditures  than  is  shown 
on  these  various  accounts,  in  which  case  an  analytical  statement  is  necessary.  Some  accountants 
keep  a  special  expense  book  arranged  with  columns  for  the  different  expenses,  and  make  this  up  once 
each  month  from  the  check  stub.    At  the  end  of  the  year  the  analytical  statement  can  be  made  from 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


257 


this  book  without  having  to  check  back  over  all  of  the  expenditures.  No  special  form  for  the  analytical 
statement  is  required.  The  facts  should  be  arranged  so  that  the  bookkeeper  can  render  an  analytical 
statement,  showing  any  account  on  his  books  at  the  time  the  statements  of  the  business  are  made, 
or  any  other  time  that  those  interested  may  desire  it.  No  set  of  books  is  systematically  kept  unless 
this  can  be  done;  and  the  student  who  completes  a  course  in  bookkeeping  does  not  understand  the 
subject  sufficiently  well  to  accept  a  position  as  bookkeeper,  unless  he  can  prepare  an  analytical  state- 
ment of  any  account  on  his  books  from  the  facts  which  created  the  various  debits  and  credits.  Illus- 
tration No.  110  shows  an  analytical  statement  of  the  General  Administrative  Expense  account  for 
the  fiscal  period  ending  August  31st. 


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Illustration  No.  no.     Analytical  Statement,  August  31. 

§  280.  A  Schedule  or  an  Exhibit  is  a  list  of  the  property  represented  by  any  account  shown 
on  the  Financial  Statement.  These  schedules  or  exhibits  are  usually  designated  by  letter,  (A,  B,  C, 
etc.),  and  accompany  the  statement  as  proof  of  its  correctness.  Thus  the  owner  of  the  business  may 
require  a  receipt  from  the  bank  showing  that  the  amount  of  money  represented  by  the  cash  account, 
is  on  deposit;  a  list  of  the  goods  in  stock  to  show  the  merchandise  represented  by  the  Inventory  account; 
a  list  of  the  notes  represented  by  the  Notes  Receivable  account,  which  should  show  the  face  value  of 
each  note,  date,  time,  signature  of  parties,  etc.;  a  list  of  the  personal  accounts  which  should  show  the 
name  of  each  person,  address,  amount  due  from  each,  and  if  desired,  when  due;  a  list  of  the  property  on 
hand  represented  by  the  fixed  investment  accounts;  lists  of  other  property  represented  on  the  statement, 
such  as  Real  Estate,  Stocks,  Bonds,  Insurance,  etc.  The  bookkeeper  must  be  prepared  to  make  these 
schedules  from  the  record  on  his  book,  hence  should  keep  his  books  so  that  all  the  required  facts  are  shown; 
it  is  possible  that  the  inventory  would  not  be  represented  on  the  books,  but  it  would  be  recorded  on  the 
inventory  book,  which  is  auxiliary  to  the  regular  books. 


FIHAUCIAL  STATEJffilT,    J.    A.    WHITNEY  &   CO.,    A0CDST   31,    191 


RESOURCES 

Cash  in  Merchants  Rational  Bank, 

2436-26 

Ifflpreet  Pund  In  sash  drawer 

20.00 

2-  56 

36 

Inventory,  Aug.  31,  191 

31261 

78 

Hotee  Receivable. 

2988 

99 

Real  Estate, 

1250 

00 

Accounts  Receivable,  (Trade  Customers) 
Less  Reserve  for  Bad  Debts, 

Total  Current  Assete, 

10997.99 

222.84 

10775 

15 

48732 

se 

Office  Equipment, 

Lees  Depreciation. 

Store  Pixtures, 

Less  Depreciation. 

Delivery  Equipment, 

LesG  Depreciation. 

Total  Fixed  Inveetinente , 

500.00 

42.25 

467 
301 

2850 

75 
75 

18 

3609 

66 

350.00 
28.25 

3018.00 
167.82 

J.  C.  Bell, 

467 

15 

P.  C.  C.  Sc   St.  L. 

10 

95 

Insurance, 

191 

25 

Good  Will,   ^ 

5079 

29 

Treasury  Stock, 

500 

00 

Sundry  Resource  Inventories 

Branch  Store  (Inventory) 
Rent  of  house,  216  Cherry  St., 
Stamps,  stationery,  etc,  on  hand. 
Advertising  matter  on  hand. 
Warehouse  supplies. 

Total  Resources, 

9127.65 

27.50 

82-65 

119-65 

63-75 

9421 

20 

15689 

84 

68031 

80 

LIABILITIES 

• 

Botes  Payable, 

5014 

28 

Accounts  Payable,  (Trade  Creditors) 

17953 

02 

Sundry  Liability  Inventories, 
Freight  Bill  unpaid. 
Rent  for  August, 

Pay  Roll,  (Branch  Store,  5  daya) 
J.  C  Bell's  erponses. 
Garage  bill  and  board  for  horses. 

Total  Liabilities, 

Present  Capital, 

340.29 
150.00 
135.42 
87.65 
122.50 

835 

86 

23803 

16 

44228 

64 

Capital  Stock  issued. 

41000 

00 

Bet  Gain  for  current  fiscal  period. 

3228 

64 

Distribution, 

Dividend  Ho.  1,  3%, 
Surplus  Account, 

. 

1215 
2013 

00 
64 

3228 

64 

3228 

64 

Illustration  No.  iii.     Financial  Statement,  August  31st. 


THADING,  AKD  PROFIT  AH3)  LOSS  STATEMENT,  J.  A.  WHITBEY  &  CO.,  AOC  31,  191 


RETURNS 

Sales, 

Less  rebates  and  retarns.              421-32 
"   Sales  DlBoonnt,                 166-47 

Bet  returns  from  merchandise  sold, 

COSTS 

Inventory,  (Mdse.  on  hand  July  2d)        16606.05 

Add  Purchases,                    29837.52 

"  Freight  In,                     954.32 

Deduct  rebates  and  returns.           169.32 
"    Purchases  Discount.            568.09 

Bet  cost  of  goods  purchased. 

Less  Inventory,  August  3l8t, 

Bet  cost  of  goods  sold. 

Gross  Trading  Profit, 

OTHKK  PROFITS 
Branch  Store, 

Real  KBtate  Expense  and  Revenue, 
Total  Profits, 

JiXPEHSF^ 

General  Administrative  Expense, 

Selling  Expense. 

Salaries  in  Selling  Department,        567.39 
Freight  Out,                          43.85 
Advertising,                        173.91 
Traveling  Expense,                   568.30 
Warehouse  Expense,                   329.70 
Delivery  Expense,                    402.79 

Total  Expenses 

OTHER  LOSSES 
Interest.                                13.32 
Surplus  Account,                           22-80 
Total  Losses, 
Bet  Gain  for  current  fiscal  period. 

Distribution, 

Dividend  Ho.  1, 
Surplus  Account 

20981 
687 

72 

79 

20393 

16398 

47397 
737 

41 

73 

46660 
31261 

48 
78 

•  1444 

55 

1143 
2085 

43 

76 
94 

70 

4996 
1499 

03 

43 

6494 
3266 

46 

3229 

36 

70 
12 

1215 
2013 

64 

as 

3228 
3228 

64 

3228 

64 

64 

-\ 

Illustration  No.  112.     Trading,  and  Profit  and  Loss  Statement,  August  31st. 


26o  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  281.  The  Statement  of  the  Business  for  a  corporation  does  not  differ  from  that  made  for 
an  individual  or  partnership,  except  in  the  manner  of  closing,  unless  the  law  under  which  the  corpora- 
tion was  created,  required  a  special  form.  As  stated  in  §  78,  a  statement  of  the  business  must  show  the 
resources,  liabilities,  present  capital,  profits,  losses,  and  the  net  gain  or  loss.  These  should  be  shown 
in  detail  on  the  Financial,  Trading  and  Profit  and  Loss  Statement. 

By  referring  to  illustration  No.  iii,  the  student  will  note  that  the  arrangement  of  the  Financial 
Statement  is  the  same  as  that  shown  in  previous  illustrations,  except  more  detailed  information  is  given. 
If  desired,  the  value  of  the  property  belonging  to  the  branch  store  may  be  listed  under  the  current  re- 
sources instead  of  the  sundry  resource  inventories.  The  difference  between  the  total  resources  and  to- 
tal liabilities  is  the  capital  of  the  corporation.  The  difference  between  this  and  the  capital  stock  issued 
is  the  net  gain  for  the  current  fiscal  period.  If  the  surplus  account  represents  a  part  of  the  profits  from 
a  preceding  fiscal  period,  this  would  be  deducted  from  the  difference  between  the  present  capital  and  the 
capital  stock  issued,  in  order  to  ascertain  the  net  gain  for  the  current  fiscal  period.  The  distribution 
of  the  gain  is  shown  last.  At  this  time,  3%  is  closed  into  Dividend  No.  i  account,  and  the  remainder 
into  Surplus  account.  The  undivided  profits  may  be  closed  into  a  Surplus  account.  Undivided  Profits 
account  or  a  Sinking  Fund  account.    The  board  of  directors  usually  designates  the  distribution  of  this. 

By  referring  to  illustration  No.  112,  the  student  will  note  that  the  form  of  the  Trading  and  Profit 
and  Loss  statement  is  the  same  as  that  he  has  been  using,  except  more  detailed  information  is  given. 
The  expenses  are  divided  into  the  operating  and  the  selling  expenses,  the  total  of  each  being  shown. 
At  this  time  the  Surplus  account  represents  miscellaneous  losses  and  gains  charged  and  credited  to  it 
during  the  fiscal  period.  If  it  has  represented  a  part  or  all  of  the  undivided  profits  of  the  preceding  fiscal 
period,  it  would  not  be  considered  as  a  loss  or  gain,  but  be  deducted  from  the  total  net  gains  in  order  to 
ascertain  the  net  gain  for  the  current  fiscal  period,  as  explained  above.  The  same  distribution  is  shown 
on  both  statements,  to  prove  the  correctness  of  each.  The  board  of  directors  may  require  schedules 
or  exhibits  (§  280)  to  represent  the  property  or  obligations  shown  on  the  Financial  Statement  and  ana- 
lytical statements  (§  279)  to  show  detailed  information  relative  to  various  accounts  represented  on  the 
Trading  and  Profit  and  Loss  statement. 

§  282.  Closing  the  Ledger  for  a  Corporation.  The  ledger  is  closed  by  journal  entries,  as  ex- 
plained in  §  200  and  illustrated  in  illustrations  Nos.  71  and  72.  It  requires  two  distinct  entries — one 
to  close  those  accounts  affecting  the  Trading  statement,  and  the  other  to  close  those  accounts  affecting 
the  Profit  and  Loss  statement.  Each  account  having  a  debit  balance  that  affects  the  Trading  statement 
is  credited,  and  the  Trading  account  debited;  each  account  having  a  credit  balance  is  debited,  and  the 
Trading  account  credited.  The  Profit  and  Loss  account  is  credited  with  the  difference,  which  is  the 
gross  trading  profit.  Each  account  having  a  credit  balance  that  affects  the  Profit  and  Loss  statement 
is  debited,  and  the  Profit  and  Loss  account  credited;  each  account  having  a  credit  balance  is  debited, 
and  the  Profit  and  Loss  account  credited.  The  difference  is  credited  to  the  Dividend  No.  i  account, 
and  the  Surplus  account — the  former  with  the  amount  of  the  dividend  to  be  declared,  and  the  latter  with 
the  undivided  profits. 

After  these  entries  have  been  posted  and  the  various  accounts  ruled  with  single  and  double  lines 
and  footed  with  black  ink,  two  entries  are  made  to  close  the  Sundry  Resource  Inventories  and  Sundry 
Liability  Inventories  accounts  into  the  proper  service  accounts,  as  explained  in  §  200. 

§  283.  Proof  Sheet.  After  the  ledger  has  been  closed,  as  explained  in  §§  200  and  282,  a  Proof 
Sheet  is  made  from  the  accounts  in  the  general  ledger.  This  is  made  to  prove  that  the  ledger  is  in  bal- 
ance after  the  closing  entries  have  been  posted.  It  will  contain  all  the  accounts  shown  on  the  Financial 
statement,  except  those  represented  by  the  Sundry  Resource  Inventories  and  Sundry  Liability  Inven- 
tories account.  These  will  appear  on  the  Proof  Sheet  in  the  proper  service  accounts.  The  bookkeeper 
can  not  afford  to  take  it  for  granted  that  his  ledger  is  in  balance  after  it  has  been  closed.  Since  the  Proof 
Sheet  is  the  only  absolute  evidence  he  has  that  it  is  in  balance,  this  must  always  be  made  before  any 
entries  for  transactions  that  occur  in  the  next  fiscal  period  have  been  posted. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  261 

EXERCISES  IN  JOURNAL  ENTRIES  AND  STATEMENTS— CORPORATION. 

EXERCISE  No.  76.  i.  F.  E.  Lakey,  N.  B.  Stone  and  F.  G.  Nichols  are  engaged  in  the  whole- 
sale hardware  business,  the  firm  being  conducted  as  a  partnership.  At  the  close  of  the  fiscal  period, 
June  30th,  191 1,  after  the  books  are  closed  their  capital  accounts  are  credited  as  follows:  F.  E.  Lakey, 
Cr.  $12,642.91;  N.  B.  Stone,  Cr.  $7,624.29;  F.  G.  Nichols,  Cr.  $8,264.32.  They  decide  to  incorporate 
the  business  with  a  capital  stock  of  $50,000.00,  consisting  of  5,000  shares,  par  value  $10.00  per  share. 
The  partners  accept  3,100  shares,  for  their  interest  and  good  will  in  the  business,  distributed  as  fol- 
lows: F.  E.  Lakey,  1,400;  N.  B.  Stone,  800;  and  F.  G.  Nichols,  900.  In  addition  to  this,  they  have 
sold  the  following  stock:  H.  O.  Warren,  300  shares,  paid  for  with  check;  A.  B.  Wright,  200  shares, 
paid  for  with  check;  W.  H.  Drew,  250  shares,  one-half  paid  for  with  check,  and  a  note  due  in  sixty 
days  for  the  other  half;  C.  O.  Milton,  850  shares,  paid  for  by  real  estate  valued  at  $8,000.00,  bal- 
ance to  be  paid  for  on  demand;  A.  H.  Mayo,  300  shares,  paid  for  with  check. 

Make  the  required  entry  for  changing  the  partnership  to  a  corporation,  using  the  cash  book 
and  journal. 

2.  Robert  Brown  is  employed  by  the  Central  Hardware  Co.,  and  has  purchased  two  shares 
of  their  capital  stock  at  the  par  value  of  $100.00  per  share,  this  purchase  being  made  with  the  under- 
standing that  the  stock  is  to  be  purchased  by  the  company  if  he  should  at  any  time  leave  their  em- 
ploy.    June  30th  he  decides  to  resign  and  they  give  him  a  check  for  the  par  value  of  his  stock. 

Make  the  entry  the  bookkeeper  for  the  corporation  would  make  on  his  cash  book. 

3.  The  bookkeeper  for  the  Union  Grocery  &  Mfg.  Co.  makes  the  Financial,  Trading,  and  Profit 
and  Loss  statements  at  the  close  of  the  fiscal  period,  June  30,  191 1,  from  the  following  facts: 

TRIAL  BALANCE:  Capital  stock,  Cr.  $25,000.00;  Sales,  Dr.  $115.65,  Cr.  $37,421.96;  Pur- 
chases, Dr.  $26,542.11,  Cr.  $318.74;  Inventory,  Dr.  $18,342.97;  Sales  Discount,  Dr.  $427.36,  Cr, 
$20.00;  Purchases  Discount,  Dr.  $15.27,  Cr.  $527.52;  Freight  In,  Dr.  $516.40;  Manufacturing  De- 
partment, Dr.  $9,642.79,  Cr.  $10,211.52;  Plant  and  Machinery,  Dr.  $5,000.00;  Reserve  for  De- 
preciation of  Plant  and  Machinery,  Dr.  $87.65,  Cr.  $100.00;  Office  Equipment,  Dr.  $652.75;  Re- 
serve for  Depreciation  of  Office  Equipment,  Cr.  $32.68;  General  Administrative  Expense,  Dr. 
$1,875.50,  Cr.  $56.40;  Selling  Expense,  Dr.  $2,852.79,  Cr.  $54.00;  Freight  Out,  Dr.  $61.75;  Interest, 
Dr.  $86.50,  Cr.  $72.34;  Insurance,  Dr.  $162.50;  Notes  Receivable,  Dr.  $5,671.25;  Notes  Payable, 
Cr.  $3,500.00;  Accounts  Receivable,  Dr.  $5,427.80;  Accounts  Payable,  Cr.  $3,429.56;  Surplus,  Dr. 
$219.65,  Cr.  $518.50;  Reserve  for  Bad  Debts,  Cr.  $211.55;  Sundry  Resource  Inventories,  Dr. 
$1204.11;  Sundry  Liability  Inventories,  Cr.  $162.50;  Cash,  Dr.  $2732.47. 

INVENTORY:  Salable  merchandise  on  hand,  $14,269.87.  A  dividend  of  4%  is  declared,  and 
the  balance  of  the  profit  credited  to  the  Undivided  Profit  account. 

Make  the  Financial,  Trading,  and  Profit  and  Loss  statements.  The  Surplus  account  represents 
miscellaneous  losses  and  gains  for  the  current  fiscal  period. 

4.  Rule  a  cash  journal  similar  to  illustration  No.  116,  with  columns  for  the  following  accounts: 
Cash,  Dr.  and  Cr. ;  General  Ledger,  Dr.  and  Cr. ;  Sales  Ledger,  Dr.  and  Cr. ;  Sales  Discount,  Dr. ; 
Purchases,  Dr.  and  Cr.;  Sales,  Dr.  and  Cr. ;  Interest,  Dr.  and  Cr. ;  General  Administrative  Expense, 
Dr.;  Selling  Expense,  three  debit  columns  as  follows:  Salaries,  Delivery  Expense,  and  Warehouse 
Expense.  Record  the  following  transactions  in  this  book  according  to  instructions  given  in  §  288, 
11f  1-22. 

July  1st.  Balance  on  hand,  $8,654.95;  ist,  gave  Robertson  Bros,  a  check  for  $316.55,  in  pay- 
ment for  invoice  of  this  date;  2d,  received  a  sixty-day  note  for  $376.55  from  A.  R.  David  on  account, 
less  $3.65  interest  to  maturity  (discount  on  the  note) ;  2d,  gave  A.  H.  Moses  a  check  for  $83.33,  in  pay- 
ment of  July  rent;  2d,  gave  the  Brown  Manufacturing  Co.  a  check  for  $416.80,  in  payment  for  in- 
voice of  this  date;  2d,  received  from  J.  M.  Waterson  &  Co.  a  check  for  $216.55,  ^^  full  of  account, 
less  $2.15  discount  (the  total  of  the  check  and  discount  is  entered  in  the  Sales  Ledger,  Cr.  column); 
3d,  received  from  Mason  Bros,  a  check  for  $327.40,  in  payment  for  note,  $325.00,  and  interest  on  the 
same;  3d,  gave  Peter  Heister  a  check  for  $165.50;  $150.00  to  pay  for  shelving,  and  $15.50  for  repairs 


262  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

ifl  the  warehouse;  5th,  received  checks  as  follows:  W.  H.  Massey  for  $192.65,  in  payment  for  a  cash 
sale;  R.  J.  Robey  for  $212.50,  in  payment  for  note,  $210.00,  and  interest,  $2.50;  Johnson  Bros.  $300.00, 
to  apply  on  account,  which  is  subject  to  3%  discount.  (These  three  checks  can  be  entered  on  the 
same  line,  the  name  of  the  customer  being  written  in  the  Name  of  the  Account  column.)  6th,  credit 
sales  for  the  week,  per  sales  book,  $1,865.42;  6th,  Adams  Bros,  have  returned  two  barrels  of  flour 
at  $5.50  per  barrel,  and  a  credit  bill  has  been  sent  for  the  amount;  6th,  withdrew  from  the  bank  $275.00, 
for  pay  roll,  as  follows:  Officers  and  bookkeepers'  salaries,  $125.00  (G.  A.  Exp.);  clerks  in  the  sell- 
ing department,  $75.00  (S.  E.  Salaries) ;  shipping  and  receiving  clerks,  $50.00  (S.  E.  Warehouse) ; 
drivers,  $25.00  (S.  E.  Delivery). 

Foot  each  column  and  prove  cash.  The  total  of  the  debit  columns  must  equal  the  total  of 
the  credit  columns. 

July  8th,  received  $25.00  from  W.  H.  James,  in  payment  for  a  second-hand  desk;  8th,  gave  C. 
H.  Bradford  credit  for  a  note  of  $465.25,  and  interest  on  the  same  to  maturity,  $5.62,  and  allowed 
him  a  3%  discount  on  the  amount  of  the  payment.  (Mr.  Bradford  gets  credit  for  the  face  of  the 
note,  the  interest,  and  the  discount  on  the  total  of  the  two  in  the  Sales  Ledger  column.)  9th,  re- 
ceived checks  as  follows:  C.  L.  Savage,  $162.50  on  account;  D.  L.  Taylor,  $251.37,  in  payment  for 
a  cash  sale;  9th,  gave  Borches  &  Co.  a  check  for  $927.65,  in  payment  for  invoice  of  this  date;  loth, 
returned  to  Robertson  Bros,  four  barrels  of  granulated  sugar,  1,362  pounds  purchased  on  the  ist, 
and  received  their  check  at  $5.25  per  hundred;  nth,  gave  the  Underwood  Typewriter  Co.  a  check 
for  $100.00,  in  payment  for  a  new  typewriter;  12th,  received  checks  as  follows:  R.  A.  Swaggarty, 
$211.56,  in  part  payment  of  a  bill  subject  to  3%  discount;  A.  L.  McDonald  &  Son,  $215.65,  $195.65 
in  payment  for  a  cash  sale  and  $20.00  for  a  showcase;  12th,  W.  W.  Woodruff  returned  two  boxes  of 
tobacco,  82>^  pounds,  at  42c,  and  a  credit  bill  has  been  sent  for  the  amount;  13th,  paid  $20.00  for 
stamps  (G.  A.  Exp.) ;  13th,  withdrew  a  sufficient  fund  from  the  bank  for  the  pay  roll  of  the  week 
(see  entry  on  the  6th  for  the  amount  and  columns  affected) ;  credit  sales  for  the  week,  per  sales  book, 
$1,427.62. 

Foot  all  the  columns  and  prove  cash.  The  total  of  all  the  debit  columns  must  equal  the  total 
of  all  the  credit  columns. 

5.  The  Globe  Clothing  Co.,  a  corporation  with  a  capital  stock  of  $50,000.00,  all  of  which  has 
been  subscribed  and  paid  for,  desires  to  combine  its  business  with  that  of  Goldman  &  Levy  and 
increase  the  capital  to  $75,000.00.  After  the  bookkeeper  for  Goldman  &  Levy  has  made  the  state- 
ments of  the  business  and  closed  the  ledger,  the  following  is  the  condition  of  accounts: 

Samuel  Goldman,  Capital,  Cr.  $11,418.65;  Isaac  Levy,  Capital,  Cr.  $14,327.46;  Inventory,  Dr. 
$15,276.48;  Office  Equipment,  Dr.  $525.00;  Reserve  for  Depreciation  of  Office  Equipment,  Cr.  $105.00; 
Store  Fixtures,  Dr.  $1,250.00;  Reserve  for  Depreciation  of  Store  Fixtures,  Cr.  $250.00;  Accounts 
Receivable,  Dr.  $7,642.65;  Notes  Receivable,  Dr.  $2,526.50;  Cash,  Dr.  $883.63;  Notes  Payable,  Cr. 
$1,000.00;  Standard  Woolen  Mill  Co.,  Cr.  $486.50;  McTeer  Clothing  Co.,  Cr.  $165.78;  Peoples' 
Clothing  Co.,  Cr.  $350.87. 

All  the  assets  of  the  company  are  accepted  at  their  face  value,  except  accounts  receivable,  from 
which  5%  is  deducted  for  a  possible  loss  of  bad  debts.  The  Globe  Clothing  Co.  assumes  all 
obligations  of  Goldman  &  Levy.  Samuel  Goldman  subscribes  for  115  shares  of  the  Globe  Clothing 
Co.  stock,  and  Isaac  Levy  subscribes  for  135  shares.  They  retain  the  cash  belonging  to  the 
company,  and  pay  the  difference,  in  cash,  between  the  par  value  of  the  stock  and  the  net  value 
of  their  assets.  Make  the  entry  the  bookkeeper  for  the  Globe  Clothing  Co.  must  make  on  his 
books  for  this  transaction. 

NOTE. — The  bookkeeper    for   the    Globe   Clothing    Co.   will    have    nothing   to  do   with    the  settlement  between 
Goldman  &  Levy  or  with  their  Capital  accounts.     He  considers  all  the  resources  and  liabilities  except  cash. 

6.  Risinger  &  Weick  owe  the  Standard  Manufacturing  Co.  $2,161.75,  an  account  sub- 
ject to  3%  discount.  They  settle  it  by  transferring  five  shares  of  the  Standard  Manufacturing  Go's, 
stock,    at    a   market    value   of  $147.65   per  share    (par   value,   $100.00);   Robert    Dow's   note  for 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  263 

$826.75,    Isss    6%    interest    for    52    days;    the    Standard    Manufacturing  Go's,    note    for    $500.00, 
with  interest  at  75  days,  at  6%,  and  check  for  the  balance. 

NOTE. — Some  states  do  not  permit  a  corporation  to  purchase  its  own  stock,  except  in  settlement  of  a  debt  due  it; 
and  when  so  purchased,  it  must  be  disposed  of  within  one  year.  When  stock  is  accepted  in  this  manner,  the  par  value 
is  charged  to  the  Treasury  Stock  account,  and  the  Surplus  account  is  debited  or  credited. 

7.  December  31st,  191 1,  the  bookkeeper  for  the  Davis  Mercantile  Co.,  an  incorporated 
concern,  makes  the  Financial,  Trading,  and  Profit  and  Loss  statements.  The  following  accounts 
affect  the  Trading  statement: 

Inventory,  Dr.  $8,641.92;  Sales,  Dr.  $321.50,  Cr.  $12,487.65;  Sales  Discount,  Dr.  $415.40;  Pur- 
chases, Dr.  $9,379.62,  Cr.  $518.71;  Purchases  Discount,  Dr.  $36.42,  Cr.  $618.75;  Freight  In,  Dr. 
$379.60,  Cr.  $32.48.     INVENTORY:     Salable  goods  on  hand  December  31,   1911,  $10,416.75. 

Accounts  affecting  the  Profit  and  Loss  statement  are  as  follows:  General  Administrative  Ex- 
pense, Dr.  $1,426.55,  Cr.  $118.75;  SeUing  Expense,  Dr.  $1,627.38,  Cr.  $36.50;  Real  Estate  Expense 
and  Revenue,  Dr.  $162.50;  Commission,  Cr.  $215.00;  First  National  Bank  Stock,  Cr.  $312.50.  1% 
of  personal  accounts,  $137.65,  is  set  aside  as  a  reserve  for  possible  loss  on  bad  debts. 

The  company  is  incorporated  with  a  capital  stock  of  $50,000.00,  consisting  of  1,000  shares,  at 
$50.00  per  share.  A  3%  dividend  is  to  be  declared,  and  the  balance  of  the  profit  closed  into  the  Sur- 
plus account.  Make  the  Trading,  and  Profit  and  Loss  statements,  and  the  journal  entries  to  close 
the  ledger, 

8.  May  14,  191 1,  the  People's  Shoe  Co.  purchased  an  invoice  from  the  Smith,  Briscoe 
Shoe  Co.  for  $12,652.65.  They  are  given  a  dating  of  October  ist,  with  a  discount  of  3%  if 
paid  within  ten  days  from  that  date,  and  with  the  understanding  that  if  any  payments  are  made 
prior  to  the  date  of  dating,  they  are  entitled  to  the  interest  on  the  amount  paid  from  date  up  to  Octo- 
ber nth,  in  addition  to  the  3%  discount.  They  make  settlement  of  this  invoice  as  follows:  June 
5th,  $2,562.50;  July  3d,  $1,527.42;  July  19th,  $1,400.00;  August  5th.  $587.65;  September  ist, 
$1,527.60;  September  15th,  $842.75;  October  nth,  their  check  for  the  balance.  Ascertain  the  value 
of  each  payment  and  the  amount  of  the  check. 

9.  The  bookkeeper  for  the  Sanitary  Plumbing  Co.  is  required  to  make  a  statement  of  the  busi- 
ness at  the  end  of  the  fiscal  period,  ending  June  30th,  1912.  After  making  the  required  journal  entries 
at  the  close  of  the  fiscal  period,  his  Trial  Balance  is  as  follows: 

Capital  Stock,  Cr.  $5,000.00;  Cash,  Dr.  $3,630.87;  Material,  Dr.  $9,654.29,  Cr.  $8,629.52;  Con- 
tracts, Dr.  $10,587.40,  Cr.  $12,837.64;  General  Expense,  Dr.  $1,672.59;  Delivery  Equipment,  Dr. 
$350.00;  Depreciation  of  Delivery  Equipment,  Cr.  $35.00;  Office  Equipment,  Dr.  $250.00;  Reserve 
for  Depreciation  of  Office  Equipment,  Cr.  $12.50;  Insurance,  Dr.  $300.00,  Cr.  $150.00;  Personal  Ac- 
counts, Dr.  $1,126.48,  Cr.  $906.97.  The  present  value  of  material  on  hand  is  $3,629.45.  The  board 
of  directors  have  decided  to  declare  a  dividend  of  six  per  cent,  the  balance  of  the  profit  to  be  closed 
into  the  Surplus  account. 

You  will  do  the  work  required  of  the  bookkeeper.    Material  and  Contracts  are  both  profit  accounts. 


264 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


SEPTEMBER, 

A  continuation  of  the  July  and  August  business,  introducing  accounts  with  manufacturing  costs, 
the  time  book,  pay  roll  and  the  cash  journal. 

ACCOUNTS  USED  IN  THE  MANUFACTURING  BUSINESS. 

§  284.  The  Person  or  Firm  who  manufactures  the  merchandise  sold  can  not  ascertain  the  cost 
in  the  same  manner  as  the  merchant  who  buys  merchandise  for  sale.  It  is  necessary  to  keep  special 
accounts  showing  the  amounts  paid  for  raw  material,  labor,  etc.,  that  enter  into  the  cost  of  the  articles 
sold.  There  are  two  methods  of  keeping  these  accounts,  depending  upon  the  nature  of  the  business. 
One  account  may  be  kept,  which  is  charged  with  all  amounts  that  enter  into  the  cost  of  articles  man- 
ufactured, or  accounts  may  be  kept  with  Labor,  Raw  Material,  Manufacturing  Expense,  and  such 
other  special  accounts  as  may  be  necessary.  In  either  case,  it  is  necessary  to  have  at  least  two  sep- 
arate accounts,  one  to  show  the  cost  of  property  purchased  for  use  in  manufacturing  the  articles  to 
be  sold,  and  the  other  the  cost  of  material,  labor,  manufacturing  expense,  and  returns  from  sales. 

The  object  of  introducing  these  accounts  at  this  time  is  to  illustrate  to  the  student  one  method 
of  keeping  them.  A  more  detailed  explanation  of  the  various  accounts  that  enter  into  the  cost  of 
manufacturing,  together  with  the  best  method  of  keeping  a  record  of  these  to  show  the  cost  of  the 
articles  manufactured,  is  explained  in  the  next  set. 

In  this  set  the  manufacturing  of  candy  is  introduced  as  a  department  of  the  business,  and  only 
two  accounts  will  be  kept  to  show  the  record  of  the  transactions  affecting  this  department,  one  with 
Plant  and  Machinery,  and  the  other  with  Candy. 

PLANT  AND  MACHINERY  ACCOUNT. 

§  285.  The  Object  of  this  Account  is  to  keep  a  record  of  all  property  necessary  to  conduct 
the  candy  department,  which  includes  shelving,  tables,  desks,  machines,  pullies,  motors,  belts,  etc. 
It  is  one  of  the  fixed  investments  and  is  debited  and  credited  in  exactly  the  same  manner  as  the 
Office  Equipment  account,  as  described  in  §  162.  It  is  necessary  to  have  a  Reserve  for  Deprecia- 
tion account  to  take  care  of  the  decrease  in  value  caused  by  wear  and  tear. 


Debit  the  Plant  and  Machinery  Account: 


Credit  the  Plant  and  Machinery  Account: 


^  I.  For  the  cost  value  of  all  property,  used 
in  the  manufacturing  department  on 
hand  at  the  beginning  of  the  business 
or  fiscal  period. 

^  2.  For  the  cost  value  of  all  property  pur- 
chased during  the  fiscal  period,  either 
to  take  the  place  of  that  which  has 
been  discarded  or  in  addition  to  that 
already    charged    to    the    department. 


^  3.  For  the  cost  price  of  any  property  sold, 
the  value  of  which  was  charged  to  this 
account.  (If  the  price  received  is  less 
than  that  given,  the  difiference  is 
charged  to  the  Reserve  for  Deprecia- 
tion  account.) 

^  4.  For  the  cost  price  of  any  article  replaced, 
destroyed,  or  discarded.  (At  the  same 
time  debit  the  Reserve  for  Deprecia- 
tion account.) 


^  5.  The  Balance  of  this  Account  will,  at  all  times,  show  the  cost  value  of  all  property  on  hand 
used  in  the  manufacturing  business.  It  appears  on  the  Financial  statement  with  the  fixed  invest- 
ments, the  reserve  for  depreciation  being  deducted  to  show  the  present  value. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


265 


T|6.  To  Close  the  Plant  and  Machinery  Account.  This  account  is  not  closed,  unless  it  is  desired  to 
transfer  the  balance  to  a  new  page  or  bring  it  down  on  the  same  page.  When  closed  for  this  purpose, 
the  difference  is  entered  in  red  ink  on  the  credit  side,  the  account  ruled  with  single  and  double  red 
lines,  footed  with  black  ink,  and  the  balance  transferred  to  a  new  page,  or  brought  down  on  the  same 
page  on  the  debit  side  with  black  ink. 


^^t^^^ 


f(>^^l^^/y^ 


y^/ 


/ 


^#- 


'J 


f^  (P  o  c? 


y^  / 


-^s 


/  ^c; 


Illustration  No.  113.     Plant  and  Machinery  Account. 
RESERVE  FOR  DEPRECIATION  OF  PLANT  AND  MACHINERY  ACCOUNT. 


§  286.  The  Object  of  this  Account  is  to  show  the  decrease  in  value  of  property  purchased 
for  use  in  the  manufacturing  department  on  account  of  its  use.  It  is  exactly  the  same  nature  as 
the  Reserve  for  Depreciation  of  Office  Equipment  account,  as  described  in  §  163. 


Debit    Reserve   for    Depreciation    Account: 

^  I.  For  the  cost  of  any  article  charged  to 
the  Plant  and  Machinery  account  and 
subsequently    replaced. 

^  2.  For  the  difference-  between  the  cost  and 
selling  price  of  any  article  sold,  the 
value  of  which  was  charged  to  the 
Plant  and  Machinery  account  at  the 
time  it  was  purchased. 

^  3.  For  the  cost  of  any  article  charged  to 
the  Plant  and  Machinery  account  and 
subsequently    destroyed    or    discarded. 


Credit    Reserve  for    Depreciation    Account: 

*[[  4.  At  the  close  of  each  fiscal  period  with 
the  amount  of  depreciation  as  desig- 
nated by  those  interested  in  the  busi- 
ness. (The  Manufacturing  Expense  or 
Candy  account  is  charged  with  this 
depreciation,  because  it  is  a  part  of 
the  expense  in  manufacturing  the  ar- 
ticles sold.) 


^5.  The  Balance  of  this  Account  will  show  the  net  amount  reserved  for  depreciation  of  property 
for  use  in  the  candy  department.  It  is  deducted  from  the  cost  price  of  the  plant  and  machinery,  as 
shown   by   the    balance   of  that  account,  this  deduction  being  shown  on  the  Financial  statement. 


^i^[:iii^^'t^^^^A^^='^^^^^ 


/y^..^'?^ 


.^ssie.^^ 


J^Z' 


^^^ 


y^/ 


J^ 


^^ 


^^JA 


^-^ 


Illustration  No.  114.     Reserve  for  Depreciation  of  Plant  and  Machinery  Account. 


266 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


^  6.  To  Close  the  Reserve  for  Depreciation  of  Plant  and  Machinery  Account.  This  account  is  not 
closed,  unless  it  is  desired  to  bring  the  balance  down  on  the  same  page  or  transfer  it  to  a  new  page. 
When  closed  for  this  reason,  the  difference  is  entered  on  the  debit  side  in  red  ink,  the  account  ruled  with 
single  and  double  red  lines,  footed  with  black  ink  and  the  balance  transferred  to  a  new  page,  or  brought 
down  on  the  same  page  on  the  credit  side  with  black  ink. 

CANDY  DEPARTMENT  ACCOUNT. 

§  287.  The  Object  of  this  Account  is  to  represent  the  cost  of  manufacturing  candy  and  the 
return  from  sales  of  the  same.  It  is  better  practice  to  have  separate  accounts  to  show  the  cost  of 
the  goods  manufactured,  but  many  accountants  keep  only  one  account,  especially  when  the  manu- 
facturing is  only  a  department  of  the  general  business. 


Debit   the    Candy    Department  Account: 

^  I.  For  the  cost  of  all  raw  material  (sugar, 
glucose,  chocolate,  colorings,  cartons, 
buckets,  barrels,  etc.),  on  hand  at  the 
beginning  of  the  business  or  fiscal 
period. 

^  2.  For  the  cost  of  all  raw  material  pur- 
chased for  use  in  manufacturing  candy. 

t  3.  For  all  freight  or  express  paid  on  raw 
material. 

^  4.  For  all  amounts  paid  for  labor  in  the 
candy  (manufacturing)  department. 

^  5.  For  the  salary  of  the  superintendent, 
which  is  a  part  of  the  manufacturing 
expense. 

^  6.  For  all  amounts  paid  for  rent,  license, 
telephone,  insurance,  and  other  ex- 
penses of  the  candy  (manufacturing) 
department,  which  is  a  part  of  the 
manufacturing  expense. 

^  7.  For  the  depreciation  on  plant  and  ma- 
chinery, which  is  also  a  part  of  the 
manufacturing  expense. 

K  8.  For  any  discount  deducted  by  cus- 
tomers for  prompt  payment  of  bills 
for  merchandise  sold  from  this  depart- 
ment. If  the  exact  amount  can  not 
be  determined  at  the  time  the  remit- 
tance is  received,  a  journal  entry  may 
be  made  at  the  end  of  the  month  to 
adjust  this. 


Credit  the   Candy   Department  Account: 

If  9.  For  the  total  credit  and  cash  sales  as 
shown  by  the  sales  column  in  the  cash 
journal  at  the  end  of  the  month.  If  a 
cash  journal  is  not  kept,  the  credit 
sales  would  be  posted  from  the  sales 
recapitulation  sheet,  and  the  cash  sales 
posted  from  the  general  or  special 
column  in  the  cash  book,  which  repre- 
sents cash  sales. 

t  10.  For  all  discounts  deducted  for  prompt 
payment  on  property  purchased  for 
use  in  the  candy  department.  If  the 
exact  amount  can  not  be  determined 
at  the  time  thie  remittance  is  sent,  an 
adjusting  entry  may  be  made  at  the 
end   of   each    month. 

Tf  II.  For  the  value  of  raw  material  or  manu- 
factured goods  on  hand  at  the  end  of 
the  fiscal  period.  (At  the  same  time 
debit  the  Sundry  Resource  Inventories 
account.) 


^  12.  The  Difference  between  the  two  sides  of  this  Account,  after  the  entry  for  property  on  hand 
at  the  close  of  the  fiscal  period  has  been  made,  will  show  the  net  profit  from  the  sales  of  candy 
Prior  to  this  entry,  the  debit  side  will  show  the  costs  and  the  credit  side  will  show  the  returns  from 
sales. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


267 


^13.  To  Close  the  Candy  Department  Account.  This  account  is  closed  by  the  journal  entry 
that  closes  the  accounts  affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account. 
When  this  entry  is  posted,  the  Candy  Department  account  will  balance,  and  is  ruled  with  single  and 
double  red  lines  and  footed  in  black  ink. 


Illustration  No.  115.    Candy  Department  Account. 


§  288.  Cash  JournaL  This  is  a  book  of  original  entry  in  which  all  the  transactions  are  re- 
corded. It  is  quite  popular  with  bookkeepers  and  accountants,  because  it  shows  the  complete  his- 
tory of  the  business  at  all  times.  When  it  is  used,  it  is  usually  the  only  book  from  which  transac- 
tions are  posted  to  the  general  ledger,  and  sometimes  the  only  book  from  which  transactions  are  posted 
to  any  ledger.  Other  books  are  kept  and  the  totals  only  entered  in  this;  thus  the  credit  sales  are 
entered  in  the  sales  book,  credit  purchases  in  the  purchases  book,  and,  if  desired,  cash  received  from 
customers  is  entered  in  a  special  cash  book.  Once  each  day,  week,  or  month,  the  totals  of  these 
books  are  transferred  to  the  cash  journal.  The  time  of  transferring  these  totals  will  depend  largely 
upon  the  nature  of  the  business  and  the  desire  of  those  interested.  If  a  complete  history  of  the 
business  is  to  be  kept  in  this  book,  the  totals  should  be  transferred  at  least  once  each  week.  The 
only  reason  all  the  transactions  are  not  entered  in  this  book  at  the  time  they  occur  instead  of  being 
posted  in  total,  is  because  the  data  requires  too  much  space  and  allows  only  one  person  to  work  on 
the  books.  If  special  books  are  kept  with  those  transactions  which  are  the  most  numerous,  different 
persons  can  work  on  these,  and  the  totals  given  to  the  general  bookkeeper  or  cashier  who  keeps  the 
cash  journal. 

Illustration  No.  116  shows  a  very  popular  form  of  the  cash  journal.  By  referring  to  this  the 
student  will  note  the  following  columns: 

^  I.  Cash.  Two  columns  are  provided,  one  for  receipts  and  one  for  payments.  All  cash  re- 
ceived is  entered  in  the  debit  column  and  cash  paid  in  the  credit  column,  except  amounts  paid  from 
the  imprest  fund,  which  are  entered  in  the  petty  cash  book  and  are  only  entered  in  the  cash  journal 
at  the  time  the  imprest  fund  is  renewed.  The  difference  between  the  two  columns  provided  for  cash 
should  at  all  times  equal  the  amount  of  the  cash  balance.  The  cash  columns  are  placed  to  the  left, 
because  no  amounts  are  posted  from  these  unless  a  Cash  account  is  kept  in  the  ledger,  and  then  the 
totals  only  would  be  posted  at  the  end  of  the  month. 

f  2.  Name  of  the  Account  Column.  Here  is  written  the  name  of  the  account  to  be  debited  or 
credited.     It  is  necessary  to  write  the  name  of  the  account  debited  or  credited,  and  this  should  be 


268 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


the  same  as  the  name  of  the  column  in  which  the  amount  is  entered,  unless  it  is  a  general  ledger  ac- 
count, in  which  case  it  would  be  the  name  of  the  account  affected.  If  an  amount  affects  two  or  more 
columns  and  neither  of  these  is  to  be  posted,  the  name  of  the  first  column  only  is  written. 

The  date  and  L.  F.  Columns  are  placed  at  the  left  of  the  name  of  the  accounts,  which  is  the  same 
as  a  regular  cash  book. 

^  3.  Check  Number.  This  column  is  for  the  number  of  the  check.  If  two  or  more  checks  are 
written,  and  only  one  account  in  the  General  Ledger,  Purchases  Ledger  or  Sales  Ledger  columns  is 


CTd^jh              1 

Dale 

L.F 

T^ame  of  Account 

CKiMo 

General  Ledger 

.-Tale^j  Ledger 

Purchaser  Ledger 

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Dr. 

Cr. 

Dr. 

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Illustration  No.  116.     Cash  Journal. 


affected,  the  checks  may  all  be  entered  on  one 
line.  If  a  check  requires  more  than  one  line,  it 
is  not  necessary  to  repeat  the  number,  as  the 
same  check  number  first  written  applies  to  all 
entries  until  the  next  check  number  is  entered. 
^  4.  General  Ledger.  Two  money  columns 
are  provided;  one  for  debits,  and  the  other  for 
credits.  When  a  transaction  affects  an  account 
that  is  not  represented  by  one  of  the  special 
columns,  it  is  necessary  to  enter  it  in  the  Gen- 


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Illustration  No.  116.     Cash  Journal.     (Cont'd.) 


eral  Ledger  column,  because  it  will  have  to  be 
posted  to  that  ledger. 

^  5.  Sales  Ledger.  Two  money  columns 
are  provided  for  this  account;  one  for  debits, 
and  the  other  for  credits.  When  cash  is  received 
from  a  customer  in  full  or  on  account,  the 
amount  is  entered  in  the  Cash  Dr.  column  and 
the  Sales  Ledger  Cr.  column.  If  discount  is  al- 
lowed, the  amount  with  which  the  customer's 
account  is  credited,  which  includes  the  cash  and 


baking  "Povder 

Ca-n.6y   Depari merit. 

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Illustration  No.  116.     Cash  Journal.     (Cont'd.) 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


271 


discount,  must  be  entered  in  the  Sales  Ledger  Cr.  column.  If  a  charge  is  made  to  a  customer  the 
amount  is  entered  in  the  Sales  Ledger  Dr.  column.  The  amounts  entered  in  the  Sales  Ledger  Dr. 
column  are  the  totals  from  the  sales  book  and  any  other  entry  that  affects  the  debit  side  of  a  cus- 
tomer's account. 

^6.  Purchases  Ledger.  Two  money  columns  are  provided  for  this  account;  one  for  debits, 
and  the  other  for  credits.  When  a  creditor  is  paid,  his  name  is  written  in  the  Name  of  the  Account 
column,  and  the  amount  with  which  he  is  charged  is  entered  in  the  Purchases  Ledger  Dr.  column. 


i^/a 


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Salaries 

A<3v'in§ 

Trav  Exp 

Frf.Out 

Del. Exp 

VareZxp 

Explanation 

Dr. 

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Dr 

Cr 

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Illustration  No.  116.     Cash  Journal.     (Concluded.) 


272  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

The  amount  of  cash  paid  him  is  entered  in  the  Cash  Cr.  column,  and  the  number  of  the  check  in  the 
Check  No.  column.  The  amounts  entered  in  the  Purchases  Ledger  Cr.  column  are  the  totals  from 
the  purchases  book,  and  any  other  transactions  that  affect  the  credit  side  of  a  creditor's  account. 

^  7.  Purchases  Discount  Cr.  Only  one  money  column  is  provided  for  this,  because  there  are 
very  few  transactions  in  which  the  Purchases  Discount  account  is  debited.  When  these  occur,  the 
name  of  the  account  is  written  at  the  left  and  the  amount  entered  in  the  General  Ledger  Dr.  column. 
When  we  pay  a  creditor  for  an  invoice  which  is  subject  to  discount,  the  amount  of  cash  paid  him 
is  entered  in  the  Cash  Cr.  column,  the  discount  in  the  Purchases  Discount  Cr.  column,  and  the  amount 
with  which  he  is  charged  is  entered  in  the  Purchases  Ledger  Dr.  column. 

^  8.  Sales  Discount  Dr.  Only  one  column  is  provided  for  this,  because  there  are  very  few  trans- 
actions in  which  the  Sales  Discount  account  is  credited.  In  case  such  a  transaction  does  occur,  the 
credit  must  be  entered  in  the  General  Ledger  column.  If  the  amount  received  from  a  customer  is 
subject  to  discount,  the  full  amount  with  which  he  is  credited  is  entered  in  the  Sales  Ledger  Cr.  col- 
umn, the  cash  received  is  entered  in  the  Cash  Dr.  column,  and  the  amount  of  the  discount,  in  the 
Sales  Discount  Dr.  column. 

^9.  Purchases.  Two  money  columns  are  provided  for  this  account;  one  for  debits,  and  the 
other  for  credits.  All  cash  purchases,  and  the  totals  from  the  purchases  book,  which  represents 
credit  purchases,  are  entered  in  the  Purchases  Dr.  column.  All  merchandise  returned  by  us,  and 
rebates  allowed  us  for  damaged  goods,  shortages,  overcharges,  etc.,  are  entered  in  the  Purchases 
Cr.  column. 

^  10.  Sales.  Two  money  columns  are  provided  for  this  account;  one  for  debits,  and  the  other 
for  credits.  The  Sales  Dr.  column  represents  all  goods  returned  to  us  by  customers,  all  rebates  al- 
lowed by  us  for  damaged  goods,  shortages,  overcharges,  etc.  The  Sales  Cr.  column  represents  all 
goods  sold,  either  for  cash  or  on  credit. 

^11.  Baking  Powder.  Two  money  columns  are  provided  for  this  account;  one  for  debits,  and  one 
for  credits.  It  is  debited  for  all  amounts  paid  to  the  baking  powder  company  (Standard  Mfg.  Co.), 
and  for  the  value  of  all  baking  powders  returned  by  customers.  It  is  credited  for  all  sales  of  baking 
powders,  either  for  cash  or  on  time. 

1  12.  Candy  Department.  Four  columns  are  provided  for  this  account;  three  for  the  debits, 
and  one  for  the  credits.  Amounts  paid  for  Labor  are  entered  in  the  first;  for  Raw  Material  in  the 
second;  and  for  Manufacturing  Expense  in  the  third;  amounts  received  from  the  Sales  of  candy  are 
entered  in  the  fourth. 

^  13.  Notes  Receivable.  Two  money  columns  are  provided  for  this  account;  one  for  debits, 
and  the  other  for  credits.  When  a  note  or  accepted  draft  is  received,  the  amount  is  entered  in  the 
debit  column.     When  a  note  or  acceptance  is  paid,  the  amount  is  entered  in  the  credit  column. 

T[  14.  •  Notes  Payable.  Two  money  columns  are  provided  for  this  account;  one  for  debits,  and 
the  other  for  credits.  When  a  note  is  signed  or  a  draft  accepted  by  us,  the  amount  is  entered  in  the 
credit  column.     When  a  note  or  draft  is  paid  by  us,  the  amount  is  entered  in  the  debit  column. 

^15.  Interest.  Two  money  columns  are  provided  for  this  account;  one  for  debits,  and  the 
other  for  credits.  When  a  transaction  afifects  the  Interest  account,  the  amount  is  entered  in  the 
debit  or  credit  column,  according  to  the  nature  of  the  transaction. 

^  16.  General  Administrative  Expense.  Only  one  column  is  provided  for  this,  because  there 
are  very  few  transactions  in  which  this  account  is  credited.  If  such  do  occur,  the  name  of  the  account 
would  have  to  be  written  at  the  left,  and  the  amount  entered  in  the  General  Ledger  Cr.  column.  All 
amounts  paid  for  general  administrative  expense  are  entered  in  this  one  column. 

^17.  Selling  Expense  Dr.  Six  columns  are  provided  for  this,  each  of  which  is  debited.  Amounts 
paid  for  Salaries  in  the  selling  department  are  entered  in  the  first;  for  Advertising  in  the  second;  for 
Traveling  Expense  in  the  third ;  for  Freight  Out  in  the  fourth ;  for  Delivery  Expense  in  the  fifth ;  and 
for  Warehouse  Expense  in  the  sixth. 

^18.     Explanation  Column.     At  the  extreme  right  is  a  column  for  special  explanations.     It  is 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  273 

not  necessary  to  use  this  in  every  transaction,  but  sometimes  a  word  of  explanation  is  necessary  in 
order  to  make  the  record  clear  to  the  auditor.  Some  bookkeepers  use  this  column  for  the  name  of 
the  account  for  which  a  special  column  is  provided.  In  this  set,  the  student  will  use  this  column  for 
explanation  only,  and  no  amounts  will  be  entered  in  the  special  columns,  except  where  the  name  of 
some  account  affected  by  the  transaction  is  entered  in  the  Name  of  the  Account  column. 

^19.  In  General.  If  a  transaction  affects  cash,  the  amount  received  or  paid  is  entered  in  the 
Cash  Dr.  or  Cash  Cr.  column  at  the  left,  and  in  one  or  more  of  the  many  columns  at  the  right.  The 
total  of  the  amounts  entered  in  the  debit  columns  must  always  equal  the  total  of  the  amounts  entered 
in  the  credit  columns.  If  it  is  necessary  to  enter  an  amount  in  the  General  Ledger,  Sales  Ledger  or 
Purchases  Ledger  column,  the  name  of  the  account  debited  or  credited  is  written  in  the  Name  of  the 
Account  column.  If  the  transaction  does  not  require  entries  in  any  of  these  ledger  columns,  but  is 
entered  in  one  or  more  of  the  special  columns  to  the  right  of  them,  the  name  of  the  first  column  is 
written  in  the  Name  of  the  Account  column  and  a  check  mark  placed  in  the  L.  F.  column  to  indicate 
that  it  is  not  to  be  posted.  If  a  transaction  does  not  affect  cash,  the  name  of  the  account  is  written 
in  the  Name  of  the  Account  column,  as  explained,  and  the  debits  and  credits  entered  in  the  proper 
columns  at  the  right.  Use  as  few  lines  as  possible  in  recording  a  transaction.  Usually  only  one 
line  is  sufficient.  If  it  is  a  complicated  transaction,  a  brief  description  can  be  given  in  the  Explana- 
tion column  at  the  extreme  right. 

^  20.  To  Prove  Cash  with  the  Cash  Journal.  The  difference  between  the  Cash  Dr.  and  Cash 
Cr.  columns  must  be  the  cash  balance.  This  can  not  be  accepted  as  correct  unless  all  the  columns 
prove;  hence,  each  time  the  bookkeeper  proves  cash,  he  must  foot  all  the  columns  and  add  the  debits 
and  credits;  the  total  debits  must  be  the  same  as  the  total  credits.  If  the  work  proves,  the  differ- 
ence between  the  two  Cash  columns  may  be  accepted  as  the  cash  balance.  This  balance  should 
be  verified  by  adding  the  cash  on  hand  to  the  amount  in  the  bank. 

^21.  Method  of  Keeping  the  Account  with  the  Bank.  A  special  column  may  be  provided  for  an 
account  with  the  bank,  but  this  is  not  necessary  if  the  bookkeeper  keeps  a  copy  of  all  the  deposits. 
The  best  method  is  to  list  the  checks  on  the  deposit  ticket  in  the  same  order  as  they  are  arranged  in 
the  Cash  Dr.  column.  As  each  check  is  entered  on  the  deposit  ticket,  it  is  checked  on  the  cash  jour- 
nal to  show  that  the  amount  corresponds  with  the  entry.  When  all  the  checks  have  been  listed  on 
the  deposit  ticket,  all  the  checks  entered  in  the  Cash  Dr.  column  will  have  been  checked.  If  any 
currency  has  been  received,  the  total  amount  of  currency  to  be  deposited  must  equal  the  remaining 
items  not  checked;  when  this  proves,  the  items  are  checked  in  the  same  manner  as  the  checks.  If 
all  the  money  is  deposited  in  the  bank,  all  the  amounts  entered  in  the  Cash  Dr.  column  will  have 
been  checked,  and  the  difference  between  the  Cash  Dr.  and  Cash  Cr.  columns  is  the  bank  balance. 
If  all  checks  and  money  have  not  been  deposited,  the  total  of  these  must  be  the  same  as  the  total 
of  the  amounts  not  checked  in  the  Cash  Dr.  column ;  hence,  the  cash  in  the  bank  will  be  the  difference 
between  the  Cash  Dr.  and  Cash  Cr.  columns,  less  the  amount  of  checks  and  money  on  hand.  The 
bookkeeper  must  ascertain  the  amount  on  hand  from  the  money  and  checks,  and  must  not  figure 
his  bank  balance  by  subtracting  the  total  of  the  unchecked  amounts  from  the  cash  balance. 

When  an  imprest  fund  is  kept,  the  cash  balance  will  always  be  this  amount  larger  than  the  bal- 
ance in  the  bank,  even  though  all  checks  and  money  have  been  deposited.  Thus,  if  the  imprest  fund 
is  $20.00,  the  cash  balance  will  always  be  $20.00  g' eater  than  the  amount  in  the  bank,  because  it  is 
assumed  that  this  amount  is  in  the  cash  drawer.  The  cash  balance,  the  bank  balance,  and  the  date 
and  amount  of  each  deposit  should  be  entered  in  the  Name  of  the  Account  column  with  small  pencil 
figures,  as  shown  in  illustration  No.  116. 

•[[  22.  To  Post  from  the  Cash  Journal.  Each  amount  entered  in  the  General  Ledger  Dr.  column 
is  posted  in  the  general  ledger,  to  the  debit  side  of  bhe  account  written  on  the  same  line  with  it;  each 
amount  written  in  the  General  Ledger  Cr.  columr.  is  posted  in  the  general  ledger,  to  the  credit  side 
of  the  account  written  on  the  same  line  with  it.  Eoch  amount  written  in  the  Sales  Ledger  Dr.  column  is 
posted  in  the  sales  ledger,  to  the  debit  side  of  the  account  written  on  the  same  line  with  it;  each  amount 


274  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

entered  in  the  Sales  Ledger  Cr.  qolumn  is  posted  in  the  sales  ledger,  to  the  credit  side  of  the  account 
written  on  the  same  line  with  it.  Each  amount  entered  in  the  Purchases  Ledger  Dr.  column  is  posted 
in  the  purchases  ledger,  to  the  debit  side  of  the  account  written  on  the  same  line  with  it;  each  amount 
written  in  the  Purchases  Ledger  Cr.  column  is  posted  in  the  purchases  ledger,  to  the  credit  side  of 
the  account  written  on  the  same  line  with  it.  The  page  of  the  account  in  the  ledger  is  placed  in  the 
L.  F.  column  at  the  left  of  the  name  of  the  account.  No  amounts  are  posted  from  the  various  col- 
umns to  the  right  of  these  until  the  end  of  the  month.  ' 

At  the  end  of  the  month,  the  Sales  Ledger  account  in  the  general  ledger  is  debited  for  the  total 
of  the  Sales  Ledger  Dr.  column,  and  credited  for  the  total  of  the  Sales  Ledger  Cr.  column.  The  Pur- 
chases Ledger  account  in  the  general  ledger  is  debited  for  the  total  of  the  Purchases  Ledger  Dr.  col- 
umn, and  credited  for  the  total  of  the  Purchases  Ledger  Cr.  column.  The  totals  of  all  other  columns 
are  posted  to  the  account  in  the  general  ledger,  which  corresponds  with  the  name  of  the  column, 
except  SeUing  Expense  and  Candy  Department.  The  total  of  each  column  under  Selling  Expense  is 
posted  to  the  debit  side  of  that  account,  each  amount  being  posted  separately,  and  the  name  of  the 
column  written  in  the  explanation  column.  The  Candy  department  is  debited  with  the  total  of 
each  of  the  three  debit  columns,  and  credited  with  the  total  of  the  one  credit  column,  each  amount 
being  entered  separately,  and  the  name  of  the  account  written  in  the  explanation  column.  The  totals 
of  the  Cash  columns  at  the  left  are  not  posted  unless  a  Cash  account  is  kept  in  the  general  ledger;  if 
so,  this  account  is  debited  with  the  total  of  the  Cash  Dr.  column  and  credited  with  the  total  of  the 
Cash  Cr.  column. 

NOTE. — Some  bookkeepers  do  not  post  the  totals  of  the  various  columns  until  the  end  of  the  year,  thus  showing 
a  aomplete  history  of  the  business  on  this  one  book.  If  this  is  done,  the  total  of  the  balances  in  the  sales  ledger  at  the 
end  of  the  month  must  equal  the  difference  between  the  Sales  Ledger  Dr.  and  Sales  Ledger  Cr.  columns;  and  the  total 
balances  of  the  purchases  ledger  must  equal  the  diflference  between  the  total  of  the  Purchases  Ledger  Dr.  and  Purchases 
Ledger  Cr.  columns.  It  is  not  best  practice  to  use  this  method,  as  accounts  should  be  kept  in  the  general  ledger  for  all 
of  the  accounts  represented  by  the  various  columns,  and  the  Trial  Balance  made  from  the  general  ledger.  However,  in 
some  lines  of  business  this  method  can  be  used  to  an  advantage. 

§  289.  Trial  Balance,  September  30th.  There  are  no  features  included  in  this  Trial  Bal- 
ance that  have  not  already  been  explained.  The  Trial  Balance  is  made  from  the  general  ledger, 
and  the  sales  ledger  and  purchases  ledger  proved  by  comparing  with  the  balance  of  the  Sales  Ledger 
and  Purchases  Ledger  accounts  in  the  general  ledger. 

§  290.  Statement  of  the  Business,  September  30th.  As  explained  in  preceding  sets,  the 
statement  of  the  business  consists  of  the  Financial,  Trading,  and  Profit  and  Loss  statements.  The 
difference  between  the  resources  and  liabilities  is  the  present  capital  of  the  corporation.  The  capital 
stock  and  undivided  profit  from  the  preceding  fiscal  period  deducted  from  the  present  capital,  gives 
the  net  profit  for  the  current  fiscal  period.  The  difTerence  between  the  profits  and  losses  is  the  net 
profit  for  the  current  fiscal  period.  To  this  must  be  added  the  undivided  profits  for  the  preceding 
fiscal  period,  represented  by  the  Surplus  account.  This  sum  represents  the  total  profits,  and  the 
amount  must  be  the  same  as  the  present  capital  (difference  between  the  resources  and  liabilities) 
shown  by  the  Financial  statement  less  the  capital  stock.  The  statements  can  not  be  accepted  as 
correct  until  the  amounts  agree. 

§  291.  Closing  the  Ledger,  September  30th.  The  ledger  is  closed  by  journal  entries — 
one  to  close  the  accounts  affecting  the  Trading  statement  into  the  Trading  account;  the  other  to  close 
the  accounts  affecting  the  Profit  and  Loss  statement  into  the  Profit  and  Loss  account.  These  entries 
are  posted,  and  the  accounts  in  the  ledger  ruled  with  single  and  double  red  lines,  and  footed  in  black 
ink.  Two  entries  are  then  made  to  close  the  Sundry  Resource  Inventories  account  and  the  Sundry 
Liability  Inventories  account  into  the  proper  service  accounts.  When  these  entries  are  posted,  the 
Sundry  Resource  Inventories  and  Sundry  Liability  Inventories  accounts  are  ruled  with  single  and 
double  red  lines,  and  footed  with  black  ink. 

§  292.  Proof  Sheet,  September  30th.  To  prove  that  the  ledger  is  in  balance,  a  Trial  Bal- 
ance (Proof  Sheet)  is  made  from  the  general  ledger.     The  facts  shown  on  it  will  be  the  same  as  those 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


275 


shown  on  the  Financial  statement,  except  the  accounts  represented  by  the  Sundry  Resource  Inven- 
tories and  Sundry  Liability  Inventories  accounts  are  now  represented  by  the  proper  service  accounts. 


QUESTIONS. 


7- 


10. 


I. 


12. 


13. 


14. 


15- 


16. 


17- 


18. 


Define  the  Branch  Store  account.   (§  277.) 
For    what    is    it    debited    and    credited? 

(Iflf  1-6.) 
Define    the    Agency    account.     (§  278.) 
For    what    is    it    debited    and    credited? 

m  I-5-) 

Define  an  analytical  statement.     (§  279.) 

What  accounts  should  be  explained  by 
an  analytical  statement  at  the  close 
of  the  fiscal   period?      (§  279.) 

When  accounts  with  customers  and  cred- 
itors are  kept  in  separate  ledgers,  from 
what  ledger  is  the  Trial  Balance  made? 
(§  280.) 

In  what  respect  does  the  Financial, 
Trading,  and  Profit  and  Loss  state- 
ments of  a  corporation  differ  from 
those   of    a    partnership?      (§  281.) 

When  all  the  profit  is  not  paid  out  by 
dividend,  what  account  represents  the 
undivided    profit?      (§  282.) 

Why  is  it  best  to  take  a  Proof  Sheet  after 
the   ledger  is  closed?      (§  283.) 

How  does  the  manufacturer  ascertain 
the  cost  of  the  goods  manufactured? 
(§  284.) 

What  two  accounts  are  necessary  in  a 
manufacturing  business?     (§  284.) 

Define  the  Plant  and  Machinery  account. 
(§285.) 

For    what    is    it    debited    and    credited? 

Why  is  it  necessary  to  keep  a  reserve  for 
depreciation  on  Plant  and  Machinery 
account?     (§  286.) 

For    what    is    it    debited    and    credited? 

m  1-4.) 

How  is  the  present  value  of  the  Plant  and 
Machinery  account  ascertained? 
(§285,  1f5.) 

Define  the  Candy  Department  account. 
(§  287.) 


19.  Name  three  of  the  debits  and  two  of  the 

credits.     (^^  i — 11.) 

20.  Define  the  cash  journal.     (§  288.) 

21.  Name  at  least  five  accounts  on  the  gen- 

eral ledger  that  should  be  represented 
by  columns  in  the  cash  journal. 

22.  Where  are  the  columns  for  cash  received 

and  paid  located?     (K  i.) 

23.  What  is  written  in  the  Name  of  the  Ac- 

count column?      (^  2.) 

24.  What  is  written  in  the  Check  No.  column? 

(If  3-) 

25.  What  is  entered   in   the   General   Ledger 

column?  (If  4.)  The  Sales  Ledger  col- 
umn? (Us.)  The  Purchases  Ledger 
column?     (If  6.) 

26.  Distinguish    between    the   Purchases   Dis- 

count  and   Sales   Discount  columns. 
m7   and   8.) 

27.  If   a   customer   pays   $97.00   and    this   is 

subject  to  discount,  what  amount  is 
entered  in  the  Sales  Discount  column? 

28.  What  is  entered  in  the  Purchases  column? 

(^  9.)     Sales  column?     (^  10.) 

29.  What  is  entered  in  the  Notes  Receivable 

column?  (^  13.)  Notes  Payable  col- 
umn?    (^  14.) 

30.  Name   the   other   columns   used    and   ex- 

plain each.      (^^  II,  12  and  15 — 17.) 

31.  For  what  is  the  explanation  column  used? 

(If  18.) 

32.  If  a  customer  settles  his  account  which 

is  subject  to  discount,  by  a  check  and 
note,  less  discount,  how  many  columns 
would  be  affected,  and  what  would  be 
written  in  the  Name  of  the  Account 
column?     (^  19.) 

33.  Describe    the    method    of    proving    cash. 

(If  20.) 

34.  Describe  the  method  of  keeping  the  bank 

account.     (^  21.) 

35.  Describe  the  method  of  posting.     (^  22.) 


276  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

PART  IV, 

SINGLE  ENTRY,  COMMISSION  AND  COST  ACCOUNTING. 

SINGLE  ENTRY. 

OCTOBER. 

§  293.  Single  Entry  Bookkeeping  is  the  simplest  method  of  keeping  a  record  of  business 
transactions.  It  requires  a  history  of  the  business  by  means  of  accounts,  the  same  as  Double  Entry. 
Usually  only  those  accounts  are  kept  whose  balance  shows  a  resource  or  a  liability,  and  in  many 
cases  only  accounts  with  persons.  Each  transaction  does  not  affect  two  or  more  accounts  having 
equal  debits  and  credits,  though  some  of  them  may,  depending  entirely  upon  the  accounts  kept.  Thus, 
if  an  account  is  kept  with  Notes  Receivable,  and  a  customer  settles  his  account  by  note,  the  Notes 
Receivable  account  is  debited  for  the  same  amount  as  the  customer's  account  is  credited.  If  the 
transaction  is  a  sale  for  a  note,  or  on  account,  only  the  Notes  Receivable  or  customer's  account  is 
affected,  because  the  Merchandise  account  is  not  a  resource  or  a  liability  account. 

Single  Entry  is  best  defined  as  any  method  that  is  not  Double  Entry,  because  the  application 
of  the  method  varies  with  the  wishes  of  the  proprietor  or  bookkeeper.  Any  account  kept  by  the 
Double  Entry  method  may  be  used  in  the  Single  Entry  method.  Thus,  if  a  detailed  account  of  the 
expense  of  the  business  is  desired,  an  Expense  account  may  be  kept.  If  it  is  necessary  to  keep  a 
record  of  the  goods  purchased  and  sold,  a  Merchandise  account  may  be  kept.  If  a  cash  register  is 
used,  or  there  is  not  enough  cash  handled  to  justify  the  keeping  of  a  Cash  account,  this  may  be  omitted. 

The  above  explanation  is  given  so  that  the  student  will  understand  that  there  is  really  no  Single 
Entry  method  of  keeping  books.  Most  business  men  understand  that  the  Single  Entry  method 
means  the  keeping  of  Personal  accounts  only,  and,  as  a  general  rule,  a  Single  Entry  set  of  books  con- 
tains only  Personal  accounts. 

§  294.  Comparison.  In  Single  Entry  the  record  may  be  made  according  to  the  wishes  of 
those  interested,  and  any  desired  accounts  kept;  in  Double  Entry  the  record  and  accounts  kept  must 
conform  to  certain  principles,  which  can  not  be  changed;  the  name  of  an  account  might  be  changed 
but  its  real  meaning  must  remain  the  same.  In  Single  Entry  the  bookkeeper  has  no  check  on  his 
accuracy  in  posting,  footing  accounts  in  the  ledger,  and  making  the  Statements  of  the  Business;  in 
Double  Entry  he  knows  by  the  Trial  Balance  that  all  items  have  been  posted,  the  accounts  in  the 
ledger  footed  correctly,  and  that  the  Financial,  and  Profit  and  Loss  statements  show  the  correct  gain. 
In  Single  Entry,  those  interested  in  the  business  know  (without  proof)  that  they  have  made  or  lost 
the  amount  shown  by  the  Statement  of  the  Business,  that  is,  if  the  work  is  done  correctly;  in  Double 
Entry  they  know  (with  proof)  that  the  net  gain  or  loss  is  correct,  and  know  the  accounts  that  make 
up  this  gain  or  loss.  Neither  method  will  prevent  or  detect  errors  in  calculations.  This  is  the 
reason  the  business  man  wants  a  bookkeeper  who  is  accurate. 

The  advantages  of  Double  Entry  are  so  apparent  that  this  method  is  used  by  every  up-to-date 
business  man  who  employs  a  bookkeeper,  and  by  many  who  do  not.  While  Single  Entry  may  have 
an  advantage  in  a  small  business,  yet  in  most  instances  Double  Entry  would  be  much  better.  The 
reason  Single  Entry  is  used  in  many  cases,  is  because  the  one  who  keeps  the  books  knows  nothing 
of  the  many  advantages  of  Double  Entry.  The  teacher,  who  wishes  to  do  the  most  for  his  pupil, 
will  teach  him  all  the  advantages  of  Double  Entry  and  the  disadvantages  of  Single  Entry,  and  in- 
struct him  to  change  any  Single  Entry  set  he  may  have  to  keep  to  Double  Entry  as  soon  as  possible. 

§  295.  Books  Used.  Any  book  used  with  the  Double  Entry  method  may  be  used  with  Single 
Entry;  but  the  day  book,  cash  book  and  ledger  are  the  most  popular  with  those  who  claim  to  "know" 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


277 


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278 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


the  latter  method.  Of  course,  they  do  not  know  any  method,  but  only  know  what  they  want  their 
books  to  show,  and  can  get  the  desired  results  by  using  these  three  books. 

§  296.  Day  Book.  This  is  a  book  of  original  entry.  All  transactions,  except  those  in  which 
cash  is  received  or  paid,  are  entered  in  this  book  in  the  order  in  which  they  occur.  The  two  money 
columns  do  not  indicate  debits  and  credits,  hence  it  is  necessary  to  write  Dr.  and  Cr.  (abbreviation 
of  debit  and  credit)  after  the  name  of  the  account.  This  shows  to  which  side  of  the  account  in  the 
ledger  the  amount  is  to  be  posted.  Amounts  to  be  posted  are  placed  in  the  second  column  on  the 
same  Hne  as  the  name  of  the  account.     Illustration  No.  117  shows  the  form  of  day  book  to  be  used. 

§  297.  Single  Entry  Cash  Book.  Any  desired  form  of  ruling  may  be  used.  The  form  given 
in  illustration  No.  1 1 8  shows  one  very  popular  with  those  who  keep  a  cash  book  in  connection  with 
a  Single  Entry  set  of  books.  By  referring  to  this  the  student  will  note  that  the  ruling  is  similar  to 
the  ordinary  journal,  the  receipts  being  entered  in  the  first  column  and  the  payments  in  the  second 
column.  When  the  cash  book  is  ruled  at  the  end  of  the  month,  the  balance  is  entered  in  the  credit 
column  in  red  ink,  the  word  "Balance"  being  written  at  the  left,  the  two  columns  ruled,  and  the 
balance  brought  down,  as  shown  in  illustration  No.  118. 


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Illustration  No.  118,     Single  Entry  Cash  Book. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  279 

§  298.  Ledger.  This  book  may  be  similar  to  any  ledger  used  with  a  Double  Entry  set  of 
books;  that  is,  it  may  have  the  regular  ledger  ruling  or  any  special  ruling  adapted  to  the  needs  of 
the  business.  In  every  case  it  must  be  ruled  with  two  money  columns,  one  for  the  debit  amounts, 
and  one  for  tKe  credit  amounts.  Some  blank  book  manufacturers  make  a  book  which  is  labeled 
"Single  Entry  Ledger."  This  is  ruled  like  the  day  book  and  provided  with  an  index.  This  form  is 
used  when  the  day  book  and  cash  book  are  omitted,  and  the  transactions  entered  direct  in  the  ledger. 

We  make  the  statement  about  any  desired  ruling  and  the  explanation  of  the  stock  "Single  Entry 
Ledger"  to  show  the  student  that  there  is  really  no  such  book  as  a  single  entry  ledger,  but  that  any 
form  of  ledger  may  be  used.  The  words  "Double  Entry  Ledger"  and  "Single  Entry  Ledger"  are 
printed  on  stock  books  to  distinguish  between  the  two  different  rulings,  and  not  because  they  are 
really  the  ledgers  to  be  used  in  the  methods  named. 

TRANSACTIONS  FOR  OCTOBER. 

TO  THE  STUDENT.  You  will  record  the  following  transactions  in  the  Single  Entry  day  book 
and  cash  book  and  post  to  the  ledger  when  instructed.  Accounts  will  be  kept  only  with  Notes  Receiv- 
able, Notes  Payable,  C.  W.  Ogden  Capital,  and  persons  from  whom  merchandise  is  purchased  on  time, 
and  those  to  whom  merchandise  is  sold  on  time.  When  an  account  is  affected  that  is  not  given  above, 
write  the  name  of  the  account  and  place  a  check  mark  in  the  L.  F.  column  to  indicate  that  it  is  not 
to  be  posted. 

1.  C.  W.  Ogden  invests  $1,500.00  in  the  retail  hardware  business. 
Enter  in  the  cash  book  as  shown  in  illustration  No.  118. 

2.  Bought  W.  H.  LaRue's  entire  hardware  stock  for  $2,250.00,  paying  cash  $1,000.00,  two  notes 
of  $500.00  each,  due  in  60  and  90  days,  balance  to  be  paid  before  November  ist. 

Enter  in  the  day  book  and  cash  book  as  shown  in  illustrations  Nos.  117  and  1 1 8. 

3.  Bought  from  Belknap  Hardware  Co.,  Louisville,  on  account,  merchandise  per  invoice  of  this 
date,  $150.00. 

Enter  in  the  day  book  as  shown  in  illustration  No.  117. 

Sold  C.  G.  McClure,  City,  i  Eureka  Stove,  $25.00;  5  kegs  8d  Nails  at  $3.50;  University  School, 
University  Park,  i  doz.  Superior  Heating  Stoves  at  $13.50;  130  feet  of  Stove  Pipe  at  loc. 

Enter  in  the  day  book  as  shown  in  illustration  No.   117. 

4.  Bought  from  Graham  Paper  Co.,  St.  Louis,  roofing  paper  per  invoice  of  the  2d,  $196.42; 
terms,  3/10,  n/30. 

The  terms  indicate  that  3%  may  be  deducted  if  payment  is  made  within  ten  days;  and  if  not,  the  full  amount  is  due 
in  30  days. 

5.  Paid  Gouffon  Transfer  Co.  $14.87,  freight  and  drayage  on  above  goods. 

Enter  in  the  cash  book  as  shown  m  illustration  No.  118.  No  account  is  kept  with  Freight  and  Drayage,  hence  the 
check  mark  (V)  in  the  L.  F.  column. 

6.  Sold  C.  J.  McDaniels,  City,  i  Gas  Stove,  I3.50;  i  Hammer,  75c;  2  No.  4  Simmond  Saws,  at 
$1,00;  I   Daisy  Feed  Cutter,  $14.00. 

Paid  W.  H.  LaRue  $150.00  on  account,  and  employees  wages  to  date.  $65.40. 

Post  to  the  ledger.  All  amounts  in  the  second  column  of  the  day  book  are  posted  to  the  debit  or  credit  side  of  the 
account  written  on  the  same  line  with  them;  the  debit  or  credit  is  indicated  by  "Dr."  or  "Cr."  Post  each  amount  in  the 
first  column  of  the  cash  book  to  the  credit  side  of  the*  account  written  on  the  same  line  with  it,  unless  it  has  a  check 


2^  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


mark  in  the  L.  F.  column.  Post  each  amount  entered  in  the  second  column  of  the  cash  book  to  the  debit  side  of  the 
account  written  on  the  same  line  with  it,  unless  it  has  a  check  mark  in  the  L.  F.  column.  Allow  one-fifth  of  a  page  for 
each  account. 

8.  Bought  from  American  Hardware  Co.,  Cincinnati,  merchandise  per  invoice  of  the  6th,  $264.75 ; 
terms,  5/10,  n/6o. 

9.  Sold  R.  R.  Oglesby  &  Co.,  100  gal.  Lucas  Paint  at  $1.35;  25  kegs  Assorted  Nails  at  $3.65 ;  15  gal. 
Varnish  at  $2.00;  3  doz.  Locks  at  $4.25 

10.  Received  cash  from  Judson  Harmon  for  5  kegs  Nails  at  $3.50,  and  from  University  School  in 
full  of  account. 

11.  Paid  electric  light  bill,  $13.60;  phone  rent,   $6.00,  and  stamps,   $5.00. 

Sold  Ormendorff  Bros.,  i  Eureka  Buggy,  $70.00.    City  Electric  Co.,  2  doz.  Shovels  at  $8.50  per  doz; 
6  doz.  Picks  at  $7.00;  4  Scrapers  at  $9.00;  5  Locks  at  25c. 

12.  Bought  from  C.  M.  McClung  &  Co.,  Chicago,  merchandise  per  invoice  of  the  loth,  $136.42; 
terms  60  days.    Bought  from  Johnston  Paint  Co.,  City,  10  gal.  Atlas  Paint  at  $1.25. 

13.  Paid  Graham  Paper  Co.  amount  due,  less  discount. 

Enter  in  the  cash  book;  debit  the  Graham  Paper  Co.  with  the  full  amount  of  the  invoice  in  the  second  column, 
and  on  the  line  below,  write  "Discount"  and  enter  the  amount  in  the  first  column.  Unless  this  is  done,  their  account 
might  be  debited  with  the  net  amount  of  cash  only,  in  which  case  it  would  not  balance. 

Sold  M.  B.  Arnstein,  City,  10  kegs  8d  Nails  at  $3.55;  50  gal.  Lucas  Paint,  at  $1.35. 

Sold  Bean,  Waters  &  Co.,  City,  120  lbs.  White  Lead  at  35c;  i  No.  4  Simmond  Saw,  $1.00. 

Withdrew  $50.00  for  private  use. 

Paid  employees'  salaries  for  the  week.  $86.45;  GoufTon  Transfer  Co.,  $32.65,  freight  and  drayage 
to  date. 

Post  from  the  day  book  and  cash  book  as  instructed  on  the  6th,  and  check  posting  from  the  ist  to  the  6th. 

15.  Collected  from  the  following  parties:  C.  G.  McClure,  $42.50;  C.  J.  McDaniels,  $10.00;  Ormen- 
dorff  Bros.,   $50.00;   City   Electric   Co.,   $70.00. 

Sold  C.  G.  McClure,  i  Eureka  Buggy,  $70.00;  i  Old  Hickory  Wagon,  $57.50.  H.  O.  Nelson,  200 
lbs.  White  Lead  at  35c;  10  gal.  Atlas  Paint  at  $1.60;  10  rolls  Roofing  at  $2.65. 

16.  Paid  American  Hardware  Co.,  $175.00  on  account. 

This  is  subject  to  5%  discount  as  per  terms.  Be  sure  you  charge  them  with  the  correct  amount,  which  will  be  more 
than  that  paid. 

Sold  Central  Business  College,  City,  i  I.  X.  L.  Heater,  $74.00;  20  gal.  Floor  Varnish  at  $2.50:6  gal. 
Lucas  Paint  at  $1.35;  3  Paint  Brushes,  $1.90. 

17.  R.  R.  Oglesby  &  Co.  gave  us  their  note  due  in  30  days  for  $200.00.  to  apply  on  account. 
Note  that  this  transaction  involves  a  debit  and  a  credit.     Enter  in  the  day  book. 

Bought  from  Simmonds  Hardware  Co.,  St.  Louis,  merchandise  per  invoice  of  the  nth,  $254.78; 
terms,  60  days.   , 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  281 


18.  Sold  C.  G.  McClure,    500  lbs.  White   Lead  at  35c;  35  kegs  Assorted  Nails  at  $3.65;  3  kegs 
lod  Nails  at  $3.25.    W.  R.  Austin,  Wilmington,  3  gal.  Varnish  at  $2.00. 

Bought  from  Graham  Paper  Co.,  roofing  paper  per  invoice  of  the  15th,  $136.49;  terms,  3/10,  n/30. 

19.  Accepted  C.  M.  McClung  &  Co's.,  60-day  draft,  in  full  of  account. 

Note  that  this  transaction  requires  a  debit  and  a  credit.     Enter  in  the  day  book. 

Paid  W.  H.  LaRue  $50.00  on  account. 

Sold  Ormendorff  Bros.,  100  rolls  Faultless  Prepared  Roofing  at  95c.    W.  H.  Pedigo,  Danville,  i 
Old  Hickory  Wagon,  $57.50;  5  kegs  lod  Nails  at  $3.50;  100  lbs.  White  Lead  at  35c;  i  Pocket  Knife,  25c. 

20.  Bought  from  Philadelphia  Hardware  Co.,  Philadelphia,  merchandise  per  invoice  of  the  i8th, 
$234.75;  terms,  4/10,  n/30. 

Received  check  from  A.  David  in  payment  for  200  rolls  American  Prepared  Roofing  at  77^c. 

Withdrew  $75.00  for  private  use;  paid  employees  to  date,  $92.75. 

Post  from  the  day  book  and  cash  book  as  instructed  on  the  6th,  and  check  posting  from  the  6th  to  the  13th. 

22.  Collected  from  customers  as  follows:     M.  B.  Arnstein,  in  full;  Bean,  Waters  &  Co.,  in  full; 
C.  G.  McClure,  $100.00;  Central  Business  College,  $100.00. 

Discounted  R.  R.  Oglesby  &  Co.'s  note  at  the  bank,  receiving  credit  for  the  face  value,  less  $3.00 
discount. 

Enter  the  face  of  the  note  in  the  first  column  and  the  discount  in  the  second  column  of  the  cash  book. 

23.  Sold  University  School,  42  rolls  Paraflint  Roofing  at  $2.45;  i  Hammer  85c. 
Paid  W.  H.  LaRue  balance  due  him. 

24.  Bought  from  American  Hardware  Co.,  merchandise  per  invoice  of  the  22d,  $186.75;  terms, 
5/10,  n/60. 

Sold  Darby  &  Ragland,  Dallas,  50  kegs  Assorted  Nails  at  $3.55;  150  lbs.  White  Lead  at  35c;  i 
Hatchet,  75c.     City  Electric  Co.,  i  American  Buggy,  $75.00. 

25.  Sent  Graham   Paper  Co.,   a  check  in   full  of  account. 

Darby  &  Ragland  settled  their  account  in  full,  less  2%,  per  contract. 
W.  H.  Pedigo  gave  us  his  note  due  in  30  days  in  full  of  account. 

26.  Paid  Belknap  Hardware  Co.  $75.00  on  account. 

Bought  from  Standard  Hardware  Co.,  Cincinnati,  merchandise  per  invoice  of  the  23d,  $62.75;  terms, 
60  days. 

27.  Sent  Philadelphia  Hardware  Co.  a  New  York  Exchange  in  full  of  account,  less  discount.    The 
bank  charged  50c  for  issuing  the  exchange. 

Sold  H.  O.  Nelson,  50  rolls  Paracote  Roofing  at  $2.10. 

Paid  employees  to  date,  $86.27;  rent  for  the  month,  $50.00;  Gouffon  Transfer  Co.,  $62.75,  freight 
and  drayage  to  date. 

29.     Received  from  H.  O.  Nelson  a  60-day  note  in  full  of  account. 


282  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

30.  Bought  from  Chatfield  &  Woods,  City,  merchandise  per  invoice  of  the  27th,  $169.25;  terms, 
3/10,  n/60. 

31.  Have  decided  to  change  the  books  from  Single  to  Double  Entry.  Post  and  check  all  items  to 
date,  and  make  a  Statement  of  the  Business  using  the  following  inventories:  Merchandise  in  stock, 
$2565.87;  Office  Equipment  consisting  of  desks,  chairs,  safe,  etc.,  $200.00.  When  you  have  completed 
the  statement,  make  the  proper  entry  to  change  the  books  from  Single  to  Double  Entry. 

Close  the  ledger  as  instructed  in  §  300,  and  make  the  opening  entry  in  the  journal  to  change  to  Double  Entry 
as  explained  in  §  301  and  shown  in  illustration  No.  120.  When  this  is  completed,  post  the  items  to  the  ledger,  take  a 
trial  balance  and  present  all  books  for  approval. 

§  299.  Single  Entry  Statement.  The  net  gain  or  loss  can  always  be  ascertained  whether  the 
books  are  kept  by  Single  Entry  or  Double  Entry.  If  kept  by  Double  Entry,  the  gain  is  ascertained 
by  making  the  Financial,  Trading,  and  Profit  and  Loss  statements,  and  is  not  accepted  as  correct 
until  the  results  as  shown  by  these  statements  agree.  Since  only  those  accounts  showing  a  resource 
or  a  liability  appear  on  the  Single  Entry  ledger,  the  net  gain  can  be  ascertained  by  making  the  Finan- 
cial statement,  but  there  is  no  means  of  proving  that  it  is  correct. 

To  make  a  Single  Entry  statement  proceed  as  follows:  First,  ascertain  the  value  of  property 
on  hand  by  taking  an  inventory.  Second,  list  all  the  resources  and  liabilities.  As  nothing  but  re- 
source or  liability  accounts  are  kept,  all  the  debit  balances  are  resources,  and  all  the  credit  balances, 
except  the  investment,  are  liabilities.  Third,  ascertain  the  difference  between  the  resources  and  lia- 
bilities; this  is  the  present  worth  of  the  business.  If  it  is  more  than  the  net  investment,  there  is  a 
gain;  if  less,  a  loss. 

The  above  proves  that  Single  Entry  bookkeeping  answers  every  purpose  if  the  bookkeeper  is 
accurate,  but  that  it  is  a  very  poor  method  if  the  bookkeeper  is  inaccurate.  Illustration  No.  119  shows 
the  correct  form  of  Single  Entry  statement. 

§  300.  Closing  the  Ledger.  As  all  accounts  in  the  ledger  except  the  proprietor's  Capital 
account  show  a  resource  or  a  liability,  this  is  the  only  one  to  close.  It  is  closed  in  the  same  manner 
as  the  proprietor's  Capital  account  in  Double  Entry,  as  explained  in  §  34,  ^10.  The  gain  is 
entered  on  the  credit  side,  or  the  loss  on  the  debit  side,  with  red  ink,  the  account  ruled  with  single 
and  double  red  lines,  footed  in  black  ink,  and  the  "Present  Capital"  brought  down  in  black  ink  on 
the  credit  side. 

§  301.  Changing  from  Single  to  Double  Entry.  When  it  is  desired  to  change  the  books 
from  the  Single  Entry  method  to  that  of  Double  Entry,  it  is  necessary  to  make  a  statement  of  the 
business,  and  close  the  ledger,  as  explained  in  §§  299  and  300.  A  journal  entry  is  made  from  this 
statement,  debiting  all  accounts  that  show  a  resource,  and  crediting  those  showing  liabilities,  and  the 
proprietor  for  the  investment.  This  journal  entry  will  balance,  since  the  total  Habilities,  plus  the 
present  capital  of  the  proprietor  equals  the  resources.  When  the  accounts  are  opened  in  the  ledger, 
write  the  word  "Inventory"  in  the  explanation  column  of  those  accounts  which  were  not  kept  in  the 
Single  Entry  ledger.  In  this  set  these  are  Machinery,  Inventory,  or  the  account  to  represent  print- 
ing stock  on  hand.  Office  Equipment,  and  Cash.  After  all  the  accounts  are  opened  in  the  ledger,  a 
Trial  Balance  must  be  taken  so  that  the  bookkeeper  may  be  sure  his  books  are  in  balance. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


283 


SINGLE  ENTRY  STATEMENT.  OCTOBER  31.  191 


RESOURCES . 

Cash. 

99 

60 

Inventory  (Mdse.  in  stock). 

2565 

87 

Notes  Recelva'ble, 

327 

75 

C.  G.  MoClure, 

340 

University  Sohool, 

103 

75 

C.  J.  McDaniels, 

10 

25 

R.  R.  Oglesby  &  Co., 

59 

City  Eleotrlc  Co. , 

101 

25 

Ormendorff  Bros., 

115 

Central  Business  College, 

34 

W.  R.  Austin, 

6 

Office  Equipment  (Inventory) 
Total  Resources, 

200 

3972 

47 

LIABILITIES. 

Notes  Payable, 

1136 

42 

Belknap  Hardware  Co., 

75 

American  Hardware  Co. , 

267 

29 

Johnston  Paint  Co., 

12 

50 

Simmonds  Hardware  Co., 

254 

78 

Standard  Hardware  Co.. 

62 

75 

Chatfleld  &  Woods, 
Total  Liabilities, 
C.  W.  Ogden's  present  capital. 

169 

25 

1977 

99 

1994 

48 

C.  W.  Ogden's  net  investment, 
C.  W.  Ogden's  net  gain. 

/ 

1375 

619 

48 

Illustration    No.    119.     Single   Entry  Statement. 


284 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


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Illustration  No.  120.    Journal  Entry  to  change  from  Single  to  Double  Entry. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


285 


QUESTIONS. 


8. 

9- 
10. 
II. 


12. 


Define  Single  Entry  bookkeeping.  (§  293.) 
What  class  of  accounts  are  usually  kept? 

(§  293-) 
When   does   a   transaction    have    a   debit 

and    credit?      (§  295.) 
Can  you  explain  why  there  is  really  no 

such  method  as  single  entry?     (§  293.) 
Compare    the    single    entry    and    double 

entry  method.     (§  294.) 
Name  some  of  the  advantages  of  double 

entry.     (§  294.) 
What  blank  books  are  usually  used  in  a 

single    entry    set?      (§  295.) 
Define  a  single  entry  day  book.     (§  296.) 
Define  a  single  entry  cash  book.     (§  297.) 
Define  a  single  entry  ledger.     (§  298.) 
Distinguish    between    the    stock    "Single 

Entry"    and    "Double   Entry"    ledgers. 

(§  298.) 
What    statement    can    be    made    from    a 

single   entry   ledger?      (§  299.) 


13- 


14. 


15- 


16. 


17- 


19- 


20. 
21. 


Describe     the     method     of    making     this 

statement. 
Why  is  it  that  the  bookkeeper  can   not 

prove  the  correctness  of  a  single  entry 

statement?     (§  299.) 
Describe  the  method  of  closing  the  single 

entry  ledger.      (§  300.) 
Describe  the  method  of  changing  a  set  of 

books    from    single    entry    to    double 

entry.     (§301.) 
What  will  the  journal  entry  required  to 

make  the  change  show?     (§  301.) 
Does  the  bookkeeper  who  keeps  his  books 

by  the  single  entry  method  have  any 

means    of    proving    the    correctness    of 

the  work? 
Would  single    entry  be  satisfactory   in   a 

business    where    a    large    number    of 

transactions  must  be  recorded? 
Which  method  do  you  think  is  best? 
Give  three  reasons  for  your  answer. 


PRODUCE  AND  COMMISSION  BUSINESS. 


§  302.  The  Object  of  this  Set  is  to  teach  the  student  the  nature  of  the  commission  business, 
and  give  him  an  idea  of  the  best  methods  of  keeping  Consignment  accounts.  While  there  is  not  as 
much  commission  business  done  today  as  formerly,  yet  the  student  should  understand  this  business 
and  the  accounts  relating  to  it.  The  policy  with  merchants  today  is  to  buy  all  articles  sold,  and  thus 
get  the  profit  of  the  change  in  market  prices.  The  larger  part  of  the  commission  business  is  confined 
to  fruits  and  vegetables,  and  some  classes  of  commodities  that  require  large  investments  to  market. 
Early  vegetables  and  fruits  are  grown  extensively  in  the  South,  and  marketed  in  the  large  cities  through- 
out the  United  States.  Owing  to  the  nature  of  the  product,  it  is  not  practical  for  the  merchant  to 
buy  large  quantities  and  place  them  in  stock  for  sale.  If  the  grower  sends  them  to  him  on  commis- 
sion, he  can  dispose  of  them  to  the  advantage  of  both,  and  in  case  they  spoil  before  being  sold,  he  does 
not  lose  all  of  his  profit.  However,  there  is  a  great  demand  for  fruits  and  vegetables,  and  many 
commission  merchants  keep  agents  in  the  territory  where  these  are  grown,  purchase  them  outright, 
and  assume  the  risk  of  selling  them.  Cotton  and  some  classes  of  grain  are  sometimes  handled  on 
commission,  on  account  of  the  large  amount  of  money  required  to  place  the  articles  on  the  market. 
The  market  price  of  these  products  is  continually  changing,  and  a  change  of  a  few  points  might  mean 
bankruptcy  to  the  merchant  who  carried  the  required  amount  in  stock.  By  handling  on  commission, 
the  loss  or  gain  on  account  of  a  change  in  the  market  price  is  distributed  among  many. 

When  any  class  of  merchandise  is  handled  on  consignment,  the  commission  merchant  provides 
storage  room  for  the  stock  and  undertakes  its  sale.  He  expects  the  owner  to  pay  all  charges,  which 
include  freight,  drayage,  insurance,  storage,  and  his  commission  for  making  the  sale.  He  solicits 
the  orders,  ships  the  goods  and  makes  collections.  Until  the  commission  merchant  has  sold  the 
goods,  they  remain  in  possession  of  the  owner,  and  the  merchant  is  responsible  to  him  for  them.  After 
they  have  been  sold,  no  matter  whether  the  sale  is  for  cash  or  credit,  the  commission  merchant  be- 
comes responsible  for  the  value  of  the  sale,  less  the  charges.     After  the  goods  have  been  sold,  or  at 


286 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


stated  times,  the  commission  merchant  renders  the  owner  a  statement,  showing  the  sales,  charges, 
and  the  net  amount  due  him ;  this  is  usually  remitted  at  the  time  the  statement  is  sent.  This  state- 
ment is  known  as  an  Account  Sales.     (§221,) 

NOTE. — The  commission  merchant  may  carry  a  stock  of  merchandise  which  he  has  purchased  for  sale.  This  is 
usually  of  a  different  nature  from  that  handled  on  consignment.  It  is  not  good  business  policy  for  a  commission  mer- 
chant to  carry  in  stock  goods  of  the  same  nature  as  those  handled  on  consignment. 

§  303.  Books  Used.  The  books  used  in  this  set  are  the  journal,  sales  book,  cash  book,  general 
ledger,  and  consignment  ledger.  These  are  described  in  §§  304,  305,  306,  307,  and  308,  and  in  illus- 
trations Nos.  12 1- 125. 

§304.  Journal.  The  journal  contains  three  money  columns;  two  for  debits,  and  one  for  the 
credits.  The  first  is  for  the  general  ledger  debits,  the  second  for  the  consignment  ledger  debits,  and 
the  third  for  the  general  ledger  credits.  When  an  entry  requires  an  amount  to  be  charged  to  an  ac- 
count in  the  consignment  ledger,  the  debit  amount  is  entered  in  the  second  (Consignment  Ledger 
Dr.)  column,  and  the  credit  amount  or  amounts  are  entered  in  the  third  (General  Ledger  Cr.)  column. 
If  an  entry  does  not  affect  an  account  in  the  consignment  ledger,  the  debit  amount  or  amounts  are 
written  in  the  first,  or  General  Ledger  Dr.  column,  and  the  credit  amount  or  amounts  in  the  third,  or 
General  Ledger  Cr.  column. 

Before  recording  any  transactions,  the  student  should  write  at  the  top  of  the  first  debit  column 
in  his  journal,  "General  Ledger  Dr.";  second  debit  column,  "Consignment  Ledger  Dr.";  the  third 
column,  "General  Ledger  Cr.".     See  illustration  No.  121. 


^^^i^^^^^,  /^/ 


L.E 


General  Ledger 
Dr.  ^ 


Con.Lcdoer 
Dr. 


General  Ledoer 
Cr.  ^ 


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Illustration  No.  121.     Commission  Journal. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


287 


§  305.  Sales  Book.  The  object  of  this  book  is  to  contain  a  record  of  all  credit  sales,  whether 
the  goods  belong  to  consignments,  or  from  stock.  It  is  ruled  with  three  money  columns;  the  first  is  for 
sales  of  merchandise  from  our  stock;  the  second,  sales  of  merchandise  belonging  to  consignments, 
and  the  third,  for  the  total  amount  with  which  the  customer  is  charged.  It  is  necessary  to  sep- 
arate the  sales  of  merchandise  and  consignments,  in  order  that  the  Sales  account  in  the  general  ledger 
may  show  the  amount  of  sales,  and  the  Consignment  account  in  the  general  ledger  may  show  the 
amount  of  consignment  goods  sold.  When  posting  from  this  book,  each  amount  in  the  third  column 
is  posted  to  the  debit  side  of  the  person's  name  written  on  the  same  line  with  it,  and  each  consignment 


Con. 
T<ko. 

L.F 

D  ecTcriplion 

Cr-. 

Con.iied^er 
Cr.     ^ 

Amount 
Chor§ed 

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7^ 

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y^ 

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(^ 

c^l:^  1^;>-t^^/^^  "^^^<^*^.«:^=^,^.2^            !^J£e. 

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Illustration  No.   122.     Commission  Sales  Book 


288 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


account  in  the  consignment  ledger  is  credited  with  the  amount  of  the  sale  written  on  the  same  line 
with  it.  In  order  that  the  bookkeeper  may  know  the  consignment  afifected,  the  number  of  the  con- 
signment is  entered  on  the  line  with  the  item,  and  to  the  left  of  the  L.  F.  column.  At  the  end 
of  the  month,  the  Consignment  account  in  the  general  ledger  is  credited  with  the  total  sales  of  con- 
signment goods  as  shown  by  the  total  of  the  second  column,  and  the  Sales  account  is  credited  with  the 
total  of  merchandise  sold  out  of  stock  as  shown  by  the  total  of  the  first  column.  The  total  of  the 
third  column  is  not  posted,  because  separate  accounts  are  kept  in  the  general  ledger  with  each  cus- 
tomer. 

Before  making  an  entry  in  this  book,  the  student  must  write  the  name  of  each  column  at  the 
top,  as  follows:  first  column,  "Sales,  Cr.";  second  column,  "Consignment  Ledger,  Cr.";  third 
column,  "Amount  Charged".     See  illustration  No.  122. 

NOTE. — The  clerk  who  makes  the  sale  must  indicate  on  the  sales  ticket,  or  order  blank,  goods  sold  from  stock,  and 
goods  sold  from  consignments.  Since  each  consignment  is  numbered  when  received,  the  goods  sold  from  a  consignment  are 
designated  by  the  consignment  number.  The  student  will  not  use  the  sales  tickets  in  this  set,  but  the  printed  instruc- 
tions relative  to  the  sale  will  designate  whether  the  sale  is  for  goods  sold  out  of  stock,  or  from  consignments. 


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Illustration  No.  123.     Debit  Side  of  Commission  Cash  Book. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


289 


§  306.  Cash  Book.  The  object  of  this  book  is  to  contain  a  record  of  all  transactions  in  which 
cash  is  received  or  paid.  It  is  ruled  with  three  money  columns  on  each  side.  The  first  column  on 
the  debit  side  is  for  all  amounts  received  which  affect  accounts  in  the  general  ledger;  the  second  column 
is  for  all  amounts  received  for  cash  sales  of  consignment  goods;  the  third  column  is  for  cash  sales 
of  merchandise.  The  first  column  on  the  credit  side  is  for  all  amounts  paid  which  affect  accounts 
in  the  general  ledger;  the  second  column  is  for  all  amounts  paid  on  account  of  consignments;  the  third 
column  is  for  cash  purchases  of  merchandise.  To  prove  cash,  foot  the  three  columns  on  the  debit 
side,  and  the  three  columns  on  the  credit  side,  placing  the  pencil  footings  on  the  blue  line,  just  below 
the  last  entry  on  each  side.  The  difference  between  the  total  of  the  three  columns  on  the  debit  side, 
and  the  total  of  the  three  columns  on  the  credit  side  is  the  cash  balance. 

Before  entering  any  amounts  in  the  cash  book,  the  student  must  write  the  name  of  each  column 
at  the  top,  as  follows:  Debit  side,  first  column,  "General  Ledger,  Cr.";  second  column  "Consign- 
ment Ledger,  Cr.";  third  column,  "Sales,  Cr.".  Credit  side,  first  column,  "General  Ledger,  Dr."; 
second  column,  "Consignment  Ledger,  Dr.";  third  column,  "Purchases,  Dr."  See  illustrations 
Nos.  123  and  124. 


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Illustration  No.  124.     Credit  Side  of  Commission  Cash  Book. 


290 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


§  307.  General  Ledger.  The  ruling  in  this  ledger  is  the  same  as  that  shown  in  the  various 
illustrations  of  ledger  accounts  throughout  the  text,  and  no  additional  illustration  is  necessary.  In 
this  set  it  is  to  contain  all  accounts  except  those  with  consignments,  and  one  account,  "Consignment 
Ledger"  (§311),  is  to  represent  all  of  these.  This  is  similar  to  the  Purchases  Ledger  and  Sales  Ledger 
accounts,  as  explained  in  §§  250  and  251.  The  Trial  Balance  is  made  from  the  general  ledger,  and 
will  contain  all  the  accounts  except  those  with  consignments,  and  the  Consignment  Ledger  account 
will  show  the  total  of  these.  The  Consignment  Ledger  account  is  proved  in  the  same  manner  as 
the  Sales  Ledger  account. 

§  308.  Consignment  Ledger.  The  object  of  this  ledger  is  to  contain  accounts  with  con- 
signments. The  form  is  different  from  any  which  the  student  has  used.  The  ledger  is  made  up  of 
white  and  yellow  sheets,  arranged  alternately.  By  use  of  carbon  paper,  the  facts  posted  to  the  white 
sheet  will  appear  on  the  yellow  sheet,  thus  giving  a  duplicate  record.  The  object  of  this  is  to  avoid 
having  to  make  up  the  account  sales  from  the  facts  shown  in  the  ledger.  After  all  the  items  are  posted 
to  the  proper  place,  the  account  sales  (white  sheet)  can  be  removed  and  sent  to  the  consignor.  The 
yellow  sheet,  which  contains  a  duplicate  record,  is  retained  as  the  ledger  account  for  that  particular 
consignment.  A  loose  leaf  ledger  is  more  satisfactory  for  this  arrangement,  but  as  there  are  very 
few  consignment  accounts  introduced  in  this  set,  the  bound  ledger  will  serve  to  illustrate,  to  the  stu- 
dent the  form  and  method  of  keeping  the  account.     Illustration  No.  125  shows  the  correct  form. 


Account  Sales 


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Sold  by    M.     B.    THOMPSON  commission  Merchant 


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Illustration  No.  125.     Consignment  Ledger. 

At  the  end  of  each  month,  or  when  the  Trial  Balance  is  made,  the  facts  in  this  ledger  are  proved 
to  be  correct  by  comparing  the  total  balances  with  the  balance  of  the  Consignment  Ledger  account 
in  the  general  ledger,  in  the  same  manner  as  the  sales  ledger  and  purchases  ledger  are  proved. 

§  309.  Accounts  Kept  in  this  Set.  The  following  accounts  are  kept  in  this  set :  Accounts 
with  Customers  (§  29);  Accounts  with  Creditors  (§  30);  Owner's  Capital  account  (§  34);  Notes  Re- 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  291 

ceivable  (§  123);  Notes  Payable  (§  124);  Real  Estate  (§  132);  Interest  (§  135);  Fixed  Investments 
(§§133,  162,  163,  165,  166);  Purchases  (§154);  Sales  (§155);  General  Administrative  Expense 
(§  169);  Selling  Expense  (§  170);  Insurance  (§  171);  Shipment  (§  218) ;  Consignment  (§219);  Com- 
mission (§222);  Storage  (§310);  Consignment  Ledger  (§311). 

The  student  is  already  familiar  with  all  of  these  except  the  last  two.  If  he  does  not  remember 
the  various  debits  and  credits  that  affect  the  different  accounts,  he  should  refer  to  the  paragraphs 
of  the  sections  given  in  the  references. 

STORAGE  ACCOUNT. 

§  310.  The  Object  of  this  Account  is  to  keep  a  record  of  all  amounts  charged  to  the  owner 
of  the  consignment  goods,  for  space  in  the  warehouse  or  stock  room  in  which  to  store  his  merchandise. 
It  is  really  a  part  of  the  General  Administrative  Expense  account,  because  amounts  credited  to  it 
offset  the  amounts  paid  for  rent.  The  method  of  conducting  the  business  determines  the  method 
of  keeping  this  account.  The  debits  and  credits  below  refer  especially  to  this  set,  which  is  based  on 
the  method  used  by  many  commission  merchants. 

Debit   the   Storage   Account:  Credit   the   Storage  Account: 

^  I.     For  the  rent  of  a  special  warehouse  main-  ^f  3.     For   the   amount   of  storage   charged   to 

tained   for  consignment  goods.  the  owner  of  goods  shipped  to  us  to  be 

^  2.     For  the  proportionate   part  of  the  rent  sold   on  consignment, 

of  the  storehouse,   if  no  special  ware- 
house is  maintained. 

■^4.  The  Difference  between  the  two  sides  of  this  Account  will  show  a  loss,  if  the  debit  side  is  the 
larger;  a  gain,  if  the  credit  side  is  the  larger.  While  it  is  really  a  part  of  the  General  Administrative 
Expense  account,  yet  it  is  best  to  keep  a  separate  account  with  Storage,  as  the  amounts  charged 
to  consignments  are  sometimes  more  than  the  amounts  paid  for  rent  and  maintaining  the  ware- 
house. The  difference  appears  in  the  Profit  and  Loss  statement,  being  listed  with  the  losses  if  the 
debit  side  is  the  larger,  and  with  gains  if  the  credit  side  is  the  larger. 

^[5.  To  Close  the  Storage  Account.  This  account  is  closed  when  the  journal  entry  to  close  the 
ledger  has  been  posted.     It  is  ruled  with  single  and  double  red  lines,  and  footed  in  black  ink. 

CONSIGNMENT  LEDGER  ACCOUNT. 

§  311.  The  Object  of  this  Account  is  to  keep  a  record  of  transactions  with  consignments. 
It  is  a  controlling  account  and  is  proved  by  checking  the  balance  with  the  total  of  the  balances  of 
each  consignment  account  in  the  ledger.  The  debits  and  credits  are  all  made  at  the  end  of  the  month, 
and  from  a  special  column  in  each  book  of  original  entry. 

Debit  the  Consignment  Ledger  Account:  Credit  the  Consignment  Ledger  Account: 

T[  I.     For  the  total  of  the  Consignment  Ledger  ^4.     For  the  total  of  the  Consignment  Ledger 

column  in  the  journal.  column  on  the    debit  side  of  the  cash 

•[[  2.     For  the  total  of  the  Consignment  Ledger  book. 

column  on  the  credit  side  of  the  cash    .       ^  5.     For  any  special  credits  that  may  be  made 

book.  to    consignments    in    books  of    original 

^  3.     For  the  total  of  the  Consignment  Ledger  entry  that  do  not  have  a  special  column 

column  in  the  sales  book.  for  this  account. 


292  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

^6.  The  Balance  of  this  Account  shows  a  resource,  if  the  debit  side  is  the  larger,  and  a 
liability,  if  the  credit  side  is  the  larger.  It  represents  the  various  charges  and  credits  to  consignment 
accounts  in  the  consignment  ledger.  If  the  amounts  credited  to  the  various  consignments  are  greater 
than  the  amounts  charged  to  the  various  consignments,  the  business  owes  the  consignors  the  differ- 
ence. If  the  various  charges  to  consignments  are  greater  than  the  credits  for  goods  sold,  the  owners 
of  the  consignments  owe  the  business  this  amount.  If  the  debit  side  is  the  larger,  the  difference 
appears  with  the  resources  on  the  Financial  statement;  if  the  credit  side  is  the  larger,  it  appears  with 
the  liabilities  on  this  statement. 

^[y.  To  Close  the  Consignment  Ledger  Account.  This  account  will  balance  when  account  sales 
have  been  rendered  for  all  consignments  on  hand.  For  this  reason  it  is  not  closed,  unless  it  is  desired 
to  bring  the  balance  down  or  carry  it  forward  to  a  new  page.  When  closed  under  these  conditions, 
the  balance  is  entered  in  red  ink  on  the  smaller  side,  ruled  with  single  and  double  red  lines,  footed 
in  black  ink  and  the  balance  brought  down,  or  transferred  to  a  new  page  on  the  opposite  side  in  black 
ink.  If  at  any  time  the  account  balances,  it  is  ruled  with  single  and  double  lines  and  footed  in  black 
ink. 

TRANSACTIONS  FOR  JUNE. 

TO  THE  STUDENT.  You  will  record  the  following  transactions  in  the  journal  (§  304),  sales 
book  (§  305)  and  cash  book  (§  306),  and  post  to  the  general  ledger  (§  307)  and  consignment  ledger 
(§  308)  when  instructed.  The  accounts  used  are  explained  in  §§  309,  310  and  311.  Be  sure  you  un- 
derstand these  before  recording  any  transactions. 

1.  M.  B.  Thompson  invests  $3,000.00  in  the  produce  and  commission  business. 
See  illustration  No.  123. 

2.  Purchased  merchandise  for  the  following  invoices:  Grainger  Bros.,  Clinton,  $269.48,  dated 
May  29th;  terms,  3/10,  n/30.  W.  H.  Davenport  &  Son,  Springfield,  $187.62,  dated  May  30th; 
terms,  5/10,  n/30.     Donaldson  Bros.,  Morristown,  $386.24,  dated  May  29th,  30  days. 

Enter  as  shown  in  illustration  No.  121.  As  explained,  credit  purchases  will  be  entered  in  the  journal  instead  of 
the  purchases  book. 

Received  goods  for  the  following  consignments,  as  shown  by  the  shipping  invoices:  No.  i. 
Southern  Fruit  &  Vegetable  Co.,  Atlanta,  200  crates  of  berries.  No.  2,  Central  Commission  Co., 
Jacksonville,  750  watermelons.  No.  3,  J.  J.  Archibald  &  Co.,  Macon,  200  crates  of  peaches  and  100 
baskets  of  green  beans.  Gave  L.  &  N.  R.  R.  Co.  check  for  $146.28,  in  payment  of  freight,  distributed 
as  follows:    No.  i,  $48.62;  No.  2,  $35.50;  No.  3,  $62.16. 

Enter  each  of  the  three  consignments  in  the  consignment  ledger,  as  shown  in  illustration  No.  125.  Enter 
in  the  same  ordei  as  given.  If  the  consignment  ledger  has  not  been  paged,  this  should  be  done  at  once.  All  future  con- 
signments must  be  entered  in  numerical  order,  as  the  page  in  the  ledger  indicates  the  number  of  the  consignment.  Enter 
the  freight  charges  as  shown  in  illustration  No.  124. 

NOTE. — In  business  it  is  customary  to  have  a  special  book  in  which  to  enter  consignments.  This  is  usually  termed 
the  receiving  book,  and  is  kept  so  that  a  complete  record  of  all  consignments  may  be  shown. 

Gave  W.  R.  Love  a  check  for  $450.00;  $325.00  to  pay  for  team  of  horses,  wagon  and  harness, 
and  $125.00  for  his  office  equipment. 

Enter  as  shown  in  illustration  No.  124.     Debit  Delivery  Equipment  (§  166"),  and  Office  Equipment  (§  162). 

Credit  Sales:  D.  B.  Anderson,  Clinton,  50  crates  of  berries  (i),  $3.25;  8  dozen  melons  (2)  at 
$3.60;  10  bushel  onions  at  90c;  100  bushel  Irish  potatoes  at  55c.  Robert  Foster  &  Son,  City,  10 
baskets  green  beans  (3)  at  $1.75;  50  crates  of  berries  (i)  at  $3.25;  100  sacks  of  corn,  9,276  pounds, 
at  65c  per  bushel.  C.  C.  Lotspeich,  Dayton,  10  dozen  melons  (2)  at  $3.50;  25  baskets  of  green 
beans  (3)  at  $1.75;  50  crates  of  peaches  (3)  at  $2.50;  50  bushel  onions  at  90c. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  293 

Enter  in  the  sales  book  as  instructed  in  §  305  and  shown  in  illustration  No.  122. 

Gave  Brown  Bros,  check  in  payment  for  1,500  dozen  eggs  at  22KC,  and  400  chickens  at  22c. 

As  these  goods  are  purchased  for  sale,  debit  §  154.  See  illustration  No.  124.  Reference  to  §309  will  give  the  name 
of  those  accounts  not  described  in  this  set. 

3.  Cash  Sales:  Merchandise,  $162.97;  consignments,  100  crates  of  berries  (0  at  $3.20;  25  dozen 
melons  (2)  at  $3.60;  50  baskets  green  beans  (3)  at  $1.75 

Prove  cash,  and  post  all  amounts  from  the  sales  book,  journal,  debit  side  of  the  cash  book,  and  credit  side  of  the 
cash  book.  This  includes  amounts  in  the  first  and  second  columns,  but  does  not  include  the  totals  of  any  columns.  Each 
amount  entered  in  the  General  Ledger  column  of  the  cash  book  is  posted  to  the  general  ledger  to  the  account  written  on 
the  same  line  with  it.  Each  amount  in  the  second  column  is  posted  to  the  Consignment  account  in  the  consignment 
ledger,  as  indicated  by  the  number 'of  the  consignment.  Reserve  the  first  four  pages  in  the  ledger  for  all  accounts  except 
those  with  customers  and  creditors;  these  last  two  mentioned  begin  with  page  5.  Allow  one-fourth  page  for  each  ac- 
count.    M.  B.  Thompson's  Capital  account  will  be  entered  at  the  top  of  page  i. 

The  consignment  accounts  in  the  consignment  ledger  are  opened  in  regular  order  beginning  with  No.  i.  When 
posting  to  this  book,  keep  a  sheet  of  carbon  (carbon  side  down)  between  the  white  and  yellow  sheet.  Illustration  No. 
125  shows  the  correct  form  of  a  consignment  ledger,  and  the  student  should  refer  to  this  before  posting  any  amounts  to 
this  book. 

4.  Render  an  account  sales  to  the  Southern  Fruit  &  Vegetable  Co.  for  berries  received  on  the 
2d.  Charge  5c  per  crate  Drayage,  5c  Storage,  1%  of  the  net  sales.  Insurance,  and  6%  of  the  net  sales, 
Commission.     Send  them  a  check  for  the  net  proceeds. 

Make  the  required  journal  entry  for  the  charges  as  shown  in  the  second  entry  in  illustration  No.  121.  By  referring 
to  this,  you  will  observe  that  the  consignment  is  debited,  and  the  accounts  representing  the  charges  are  credited.  Make  this 
entry  and  post  it  at  once  to  the  consignment  in  the  consignment  ledger;  also  make  the  entry  for  the  check  on  the  credit 
side  of  the  cash  book  and  post  it.  When  this  is  completed,  the  consignment  account  will  balance.  If  you  have  kept 
the  carbon  beneath  the  white  sheet  as  instructed,  you  will  have  an  exact  copy  on  the  yellow  sheet.  Remove  the  white 
sheet  on  the  perforated  line  and  give  it  to  the  teacher.     This  is  the  account  sales. 

Selling  Expense  is  credited  with  the  drayage,  because  the  cost  of  maintaining  the  delivery  equipment  is  charged  to 
this  account.     Storage  account  is  credited  for  the  storage  as  explained  in  §  310. 

Gave  R.  H.  Simmonds  &  Co.  check  for  $116.25,  in  payment  of  premium  on  insurance  policy 
issued  on  the  first  of  the  month,  covering  our  own  merchandise  and  the  consignments  on  hand.    (§  171 .) 

5.  Credit  Sales:  Olson  Bros.,  City,  50  dozen  eggs  at  27KC;  5  dozen  melons  (2)  at  $3.60;  10 
baskets  green  beans  (3)  at  $1.75.  W.  A.  Daws  &  Son,  Canton,  5  dozen  melons  (2)  at  $3.60;  5  baskets 
green  beans  (3)  at  $1.75;  10  bushel  onions  at  90c;  25  bushel  Irish  potatoes  at  60c;  50  crates  peaches 
(3)  at  $2.50.  Watson  &  Moore,  Dover,  25  crates  peaches  (3)  at  $2.50;  200  sacks  corn  18,627  pounds, 
at  63c  per  bushel. 

6.  Received  the  following  goods  on  consignment  as  per  shipping  invoices:  No.  4,  Southern 
Fruit  &  Vegetable  Co.  300  crates  berries.  No.  5,  O'Neil  Bros.,  Jackson,  200  baskets  green  peas. 
No.  6,  C.  C.  Watson  &  Bro.,  Mobile,  100  crates  cantaloupes.  No.  7,  Orr  &  Jackson,  Augusta,  100 
crates  tomatoes.  Gave  C.  &  O.  R.  R.  Co.  check  for  $168.27  ir^  payment  of  freight  on  these  goods, 
distributed  as  follows:     No.  4,  $72.12;  No.  5,  $28.46;  No.  6,  $37.80;  No.  7,  $29.89. 

Cash  Sales:     Mdse.,  $136.95;  Consignment  No.  2,  9K  dozen  melons  at  $3.50. 

Cash  sales  of  merchandise  are  entered  in  the  third  (Sales)  column  (§  155,  If  5),  and  the  consignment  goods  in  the  second 
column  (§306).  Write  the  description  of  goods  sold  in  the  explanation  column  of  the  cash  book.  When  posting  to  the 
consignment  ledger,  always  give  a  description  of  the  goods  sold,  so  that  the  consignor  may  check  the  goods  reported  sold 
with  his  record  of  the  goods  consigned. 

Gave  Y.  B.  A.  Skinner  check  for  2,500  dozen  eggs  at  22KC;  600  chickens  at  22c;  500  sacks  corn, 
49,860  pounds,  at  56c  per  bushel. 

Received  check  from  C.  C.  Lotspeich  for  $75.00,  on  account. 


294  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Paid  employees  for  week,  $38.75  (Selling  Department);  phone  rent,  $12,50;  license  for  three 
months,  $12.50. 

Charge  to  Selling  Expense  and  General  Administrative  Expense. 

Prove  cash;  post  all  items  to  date,  and  check  the  posting  for  the  1st,  2d,  and  3d. 

8.  Render  an  account  sales  for  consignment  No.  2  received  from  Central  Commission  Co. 
on  the  2d.  Charge  ic  Drayage,  ^c  Storage,  1%  Insurance,  and  6%  Commission.  Send  them  a 
check  for  the  net  proceeds. 

Sent  check  to  Grainger  Bros,  in  full  of  account,  less  discount. 

Enter  the  full  amount  of  the  invoice  on  the  credit  side  of  the  cash  book,  and  the  amount  of  the  discount  on  the 
debit  side.     The  Merchandise  Discount  account  will  represent  all  discounts  received  and  allowed.     Read  §  158. 

Sold  C.  W.  Swopshire  &  Co.,  City,  70  crates  peaches  (3)  at  $2.50;  50  crates  tomatoes  (7)  at  $2.25; 
250  sacks  corn,  2,467  pounds,  at  62c  per  bushel. 

9.  Received  check  from  D.   B.  Anderson  in  full  of  account. 

Bought  from  Short  Bros.,  Cleveland,  500  barrels  flour  at  $5.00,  per  invoice  of  the  7th;  terms, 
4/10,  n/30. 

Cash  Sales:  Mdse.,  $636.42;  consignments,  150  crates  berries  (4)  at  $2.75;  50  crates  tomatoes. 
(7)  at  $2.25. 

Sent  W.  H.  Davenport  &  Son  check  for  amount  due.  less  discount. 

10.  Render  an  account  sales  for  consignment  No.  3.  Charge  2c  Drayage,  2C  Storage,  1%  In- 
surance, 5%  Commission.     5  crates  peaches  were  decayed.     Send  check  for  the  net  proceeds. 

Make  an  entry  for  the  charges  in  the  journal,  and  for  the  check  in  the  cash  book  as  instructed  on  the  4th.  Post 
these  entries  and  all  other  amounts  affecting  this  consignment.  When  the  account  balances,  remove  the  white  sheet  and 
give  it  to  the  teacher.     This  is  the  account  sales.     See  illustration  No.  125  for  form  of  consignment  ledger. 

Credit  Watson  &  Moore  with  1,000  dozen  eggs  at  22  Kc. 

Shipped  Myers  &  Michaels,  Minneapolis,  100  cases  eggs,  30  dozen  each  (cost  22>^c),  and  50 
coops,  20  chickens  each  (cost  22c),  to  be  sold  on  our  account  and  risk. 

Goods  shipped  on  consignment  are  usually  billed  at  the  cost  price.  The  bill  sent  is  termed  a  "Shipping  Invoice" 
The  person  to  whom  the  goods  are  sent  does  not  buy  them,  but  he  must  receive  some  memorandum  so  that  he  can  check 
the  shipment  when  it  arrives.  Read  §  220  for  a  full  description  of  the  shipping  invoice  and  note  form  given  in  illus- 
tration No.  90.     This  entry  is  made  in  the  journal;  debit  §  218,  and  credit  §  154. 

Paid  Chas.  Goulsby  $32.50,  for  feeding  the  chickens,  shipped  to  Myers  &  Michaels  (§  218). 

Prove  cash;  post  all  items  to  date,  and  check  the  posting  for  the  4th,  5th,  and  6th.     Follow  previous  instructions. 

11.  Credit  Sales:  C.  L.  Wiswell  &  Son,  Cedartown,  50  baskets  green  peas  (5)  at  $1.65;  50  bar- 
rels flour  at  $6.50;  20  bushels  meal  at  70c.  G.  J.  Ashe,  City,  10  cases  eggs,  30  dozen  each,  at  27c; 
25  crates  cabbage,  2,360  pounds,  at  4Kc.  Wilkerson  &  Wilkerson  Chicago,  50  crates  cantaloupes 
(6)  at  $2.50;  500  dozen  eggs  at  27c;  100  barrels  flour  at  $6.25. 

Bought  from  C.  W.  Moody  &  Bro.,  Cleveland,  nierchandise  per  invoice  of  the  6th,  $362.50; 
terms,  net  10  days. 

12.  Render  an  account  sales  for  goods  belonging  to  consignment  No.  7.  Charge  5c  a  crate 
Storage,  4c  Drayage,  1%  Insurance,  6%  Commission.     Credit  their  account  with  the  net  proceeds. 

Follow  instructions  given  on  the  4th  and  loth.  B?  sure  to  post  all  items  relative  to  the  consignment  account  before 
removing  the  white  sheet.  This  includes  the  entry  for  the  charges  and  amount  credited  to  their  account.  If  remittance 
is  sent  for  the  net  proceeds,  cash  is  credited  for  the  amount  paid.     If  remittance  is  not  sent,  the  person  or  firm  who 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  295 

owns  the  goods  represented  by  the  Consignment  account  is  credited  for  the  net  proceeds.  When  collections  have  not 
been  made  for  goods  sold,  the  commission  merchant  usually  renders  the  account  sales  and  debits  the  consignment  account 
with  the  net  proceeds,  remitting  the  same  to  the  consignor  when  he  has  made  collecton. 

Cash  Sales:  Mdse.,  $387.50;  consignments,  40  baskets  green  peas  (5)  at  $1.65;  80  crates  berries 
(4)  at  $2.So;  50  crates  cantaloupes  (6)  at  $2.50. 

Accepted  Donaldson  Bros.'  draft  at   15  days  in  full  of  account. 

Render  an  account  sales  for  consignment  No.  6.  Charge  5c  a  crate  Storage,  4c  Drayage,  1% 
Insurance,  6%  Commission.  Send  them  a  check  for  $100.00,  to  apply  on  the  consignment,  and 
credit  their  account  with  the  net  proceeds. 

Follow  instructions  given  on  the  first  transaction  of  this  date. 

Received  the  following  consignments:  No.  8,  Central  Commission  Co.,  1,000  watermelons. 
No.  9,  J.  J.  Archibald  &  Co,,  200  crates  peaches.  No.  10,  Consolidated  Fruit  Co.,  Savannah,  500 
crates  tomatoes.  No.  11,  C.  C.  Watson  &  Bro.,  200  crates  cantaloupes.  Gave  the  Q.  &  C.  R.  R. 
Co.  check  for  $281.29  freight  on  the  above,  distributed  as  follows:  No.  8,  $62.50;  No.  9,  $56.75; 
No.  10,  $86.50;  No.  II,  $75-54- 

Robert  Foster  &  Son  gave  us  check  for  $50.00,  and  note,  dated  today  due  in  60  days  with  in- 
terest, to  balance  their  account. 

13.  Cash  Sales:  Mdse.,  $387.46;  consignments,  25  dozen  melons  (8)  at  $3.80;  25  crates  ber- 
ries (4)  at  $2.80;  100  crates  cantaloupes  (11)  at  $2.10. 

Paid  employees  (Selling  Department)  for  the  week,  $38.75;  C.  B.  &  Q.  R.  R.  Co.,  $76.54  for 
freight  on  merchandise. 

Debit  §  170  for  amounts  paid  employees,  and  §  154  for  freight  charges.  This  is  freight  on  merchandise  purchased 
and  not  consignment  goods.     When  these  entries  have  been  made,  proceed  as  follows: 

1st.  Prove  cash,  have  the  teacher  approve  the  balance,  and  rule  the  cash  book  as  shown  in  illustrations 
Nos.  123  and  124. 

2d.  Post  and  check  all  items  to  date,  including  the  total  of  the  special  columns  in  the  journal,  sales  book,  and  all 
items'entered  on  the  debit  and  credit  side  of  the  cash  book.  Open  an  account  in  the  general  ledger  with  Consignment 
Ledger  (Read  §  310).  and  debit  it  with  the  totals  of  the  "  Consignment  Ledger  "  columns  in  the  journal,  sales  book,  debit 
and  credit  sides  of  the  cash  book.  Credit  the  Sales  account  for  the  total  of  the  merchandise  sales  in  the  sales  book  and 
for  the  cash  sales  of  merchandise  in  the  cash  book.  Debit  the  Purchases  account  for  the  cash  purchases  (total  of  the 
third  column  in  the  cash  book) 

3d.  Take  a  Trial  Balance.  This  includes  accounts  in  the  general  ledger  only,  as  the  Consignment  Ledger  account 
represents  the  accounts  in  the  consignment  ledger.  After  the  Trial  Balance  has  been  made  and  proved,  make  a  list  of 
the  balances  on  the  consignment  ledger,  and  present  to  the  teacher  for  approval.  The  difference  between  the  total  debit 
and  credit  balances  must  be  the  same  as  the  difference  of  the  Consignment  Ledger  account  in  the  general  ledger. 

15.  Received  merchandise  for  the  following  invoices:  Grainger  Bros.,  $327.54,  dated  June 
I2th,  3/10,  n/30.  L.  C.  Hays  &  Son,  Davenport,  $416.65,  dated  June  9th,  net  60  days.  Donaldson 
Bros.,  $156.24,  dated  June  13th,  net  30  days. 

Cash  Sales:  Mdse.,  $248.56;  consignments,  25  dozen  watermelons  (8)  at  $3.80;  45  crates  ber- 
ries (4)  at  $2.60;  100  crates  peaches  (9)  at  $2.40. 

Wilkerson  &  Wilkerson  transferred  C.  W.  Dodge's  note  for  $487.65  on  account.  This  note  is 
dated  March  29th,  due  in  90  days,  with  interest  from  date.     Allowed  them  accumulated  interest. 

Enter  this  in  the  journal.  Debit  Interest  account  with  the  interest  on  the  face  of  the  note  from  date  to  the  present 
time. 

Paid  bookkeeper's  salary  for  first  half  of  the  month,  $25.00;  stamps  and  stationery,  $10.00 ; 
typewriter  desk,  $15.00;  Daily  News  Co.,  $12.50  for  advertising. 

16.  Gave  J.  H.  Simpson  a  check  for  2  crates  berries  purchased  on  the  15th,  which  were  returned 


296  20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


because  they  were  spoiled.     As  the  consignment  was  credited  for  this  sale,  it  would  be  charged  for 
the  check  given  for  the  goods  returned. 

Sold  W.  H.  Rowland  &  Son,  City,  400  crates  tomatoes  at  $2.25,  belonging  to  consignment  No. 
10.     This  sale  is  subject  to  3%  discount,  if  payment  is  made  within  5  days. 

Paid  Short  Bros,  amount  due,  less  discount. 

17.  Gave  G.  D.  Davis  check  for  1,000  dozen  eggs  at  22 ^c   (§  154.) 

Discounted  Robert  Foster's  note  at  the  bank,  receiving  credit  for  the  proceeds,  less  5%  (per 
annum)  interest. 

Enter  in  the  cash  book;  charge  the  Interest  account  with  the  discount  on  the  note.  Read  §  135  for  an  explanation 
of  the  Interest  account. 

Prove  cash  as  instructed,  and  post  all  amounts  from  the  15th  to  date. 

18.  Accepted  Orr  &  Jackson's  lo-day  draft  in  full  of  account. 

Credit  Sales:  Watson  &  Moore,  50  crates  tomatoes  (10)  at  $2.25;  40  baskets  green  peas  (5)  at 
$1.65;  50  barrels  flour  at  $6.25;  10  crates  of  cabbage,  964  pounds,  at  4Kc-  Central  Hotel,  City,  10 
dozen  melons  (8)  at  $3.80;  20  crates  cantaloupes  (11)  at  $2.00. 

Received  checks  in  full  of  account  from  C.  L.  Wiswell  &  Son,  and  Olson  Bros. 

Gave  C.  B.  &  Q.  Ry.  check  for  $265.48,  in  payment  of  freight  bills  to  date  (§  154). 

Drew  at  10  days  on  Wilkerson  &  Wilkerson  for  $200.00  to  apply  on  account.  Sent  the  draft 
to  the  First  National  Bank  for  acceptance  and  collection.  Make  a  note  of  this  transaction  in  the 
journal.     The  entry  will  not  be  made  until  the  bank  reports  the  draft  accepted. 

19.  Render  an  account  sales  for  consignment  No.  4.  Charge  5c  a  crate  Drayage,  4c  Storage, 
1%  Insurance,  6%  Commission.  No  commission  will  be  charged  on  the  2  crates  returned.  This 
refers  to  the  commission  only.  Send  them  a  check  for  $250.00,  to  apply  on  the  consignment,  and 
credit  the  consignor's  account  for  the  net  proceeds. 

Watson  &  Moore  returned  5  crates  of  tomatoes  which  were  spoiled  (§§219  and  §29). 

C.  W.  Swopshire  &  Co.  settled  their  account  by  note  for  $175.00,  dated  today,  due  in  30  days, 
and  check  for  the  balance. 

When  an  account  is  settled  by  note  and  check,  the  entry  may  be  made  in  the  journal  or  cash  book.  It  is  always 
best  to  make  these  entries  in  one  book.  If  the  entry  is  made  in  the  cash  book,  write  the  name  of  the  customer  and  the 
full  amount  of  his  account  on  the  debit  side,  and  on  the  credit  side  write  Notes  Receivable  and  the  face  of  the  note.  The 
difference  between  the  entry  on  the  debit  side,  and  that  on  the  credit  side  is  the  amount  of  the  check  which  does  not  ap- 
pear on  the  cash  book.  If  the  entry  is  made  in  the  journal,  debit  Notes  Receivable  for  the  face  of  the  note,  Cash  for 
the  amount  of  the  check,  and  credit  the  customer  for  the  amount  of  his  account.  On  the  debit  side  of  the  cash  book, 
write  his  name  and,  enter  the  amount  of  the  cash  in  the  first  column.  Place  a  check  mark  at  the  left  of  his  name,  to 
show  that  the  transaction  has  been  made  in  the  journal  and  posted  from  there.  It  is  necessary  to  enter  the  transaction 
on  the  debit  side  of  the  cash  book,  in  order  to  debit  cash,  as  there  is  no  Cash  account  in  the  ledger.  The  student  will 
make  his  entry  in  the  journal,  which  is  the  method  last  explained.  Place  a  check  mark  to  the  left  of  "  Cash  "  in  the 
journal. 

20.  Received  the  following  consignments  as  per  shipping  invoices:  No.  12,  Orr  &  Jackson, 
200  crates  tomatoes.  No.  13,  W.  H.  Richardson  &  Bro.,  Charleston,  300  crates  berries.  No.  14, 
Southern  Fruit  &  Vegetable  Co.,  200  baskets  peas.  Gave  the  K.  C.  S.  R.  R.  Co.  check  for  $136.50 
to  pay  for  freight,  distributed  as  follows:     No.  12,  $34.65;  No.  13,  $50.40;  No.  14,  $51.45. 

Cash  Sales:  Mdse.,  $476.42;  consignments,  3  dozen  watermelons  (8)  at  $3.80;  75  crates  peaches 
(9)  at  $2.35;  50  crates  tomatoes  (10)  at  $2.25. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING.  297 

Received  check  from  W.  H.  Rowland  &  Son  in  full  of  account,  less  3%  discount.  As  these  were 
all  consignment  goods,  you  will  charge  the  discount  to  consignment  No.  10. 

Enter  the  discount  in  the  second  column  on  the  credit  side  of  the  cash  book. 

Render  an  account  sales  for  consignment  No.  10.  Charge  2c  per  crate  Drayage,  2c  Storage, 
1%  Insurance,  6%  Commission.     Send  them  a  check  for  the  net  proceeds. 

Paid  employees  for  the  week  (Selling  Department),  $45.50. 

Prove  cash;  post  all  items  to  date,  and  check  the  posting  for  the  15th,  i6th  and  17th. 

22.  The  bank  reports  the  lo-day  draft  drawn  on  Wilkerson  &  Wilkerson  accepted  on  the  19th. 

Myers  &  Michaels  sent  an  account  sales  of  Shipment  made  on  the  loth.  and  inclosed  check  for 
I984.75,  in  payment  of  the  net  proceeds. 

Enter  this  in  the  cash  book,  crediting  Myers  and  Michaels  Shipment  for  the  amount  of  the  check. 

Credit  Sales:  D.  L.  Carpenter  &  Son  City,  70  baskets  green  peas  (5)  at  $1.65;  50  barrels  flour  at 
$6.25;  150  sacks  corn,  14,621  pounds,  at  63c  per  bushel.  Watson  &  Moore,  100  crates  berries  (13)  at 
$2.75;  25  barrels  flour  at  $6.25;  20  crates  cabbage,  1,864  pounds,  at  ^%c.  Wilkerson  &  Wilkerson,  50 
crates  tomatoes  (12)  at  $2.00;  100  barrels  flour  at  $6.00;  200  sacks  corn,  20,006  pounds,  at  63c  per 
bushel. 

Gave  G.  L.  Craft  check  for  75  cases  eggs,  30  dozen  each,  at  22  Kc.  and  500  sacks  corn,  49,864 
pounds,  at  56c  per  bushel. 

23.  Shipped  Geo,  W.  Potter  &  Son,  New  York,  100  cases  eggs,  30  dozen  each,  (cost  22>^c)  to 
be  sold  on  our  account  and  risk. 

See  instructions  under  the  third  transaction  of  the   loth. 

Render  an  account  sales  for  consignment  No.  5.  Charge  3c  Drayage,  2c  Storage,  1%  Insurance, 
6%  Commission.     Credit  the  consignor's  account  with  the  net  proceeds. 

Sent  Grainger  Bros,  check  for  amount  due,  less  3%  discount. 
Enter  in  cash   book  according  to  previous  instructions. 

24.  Cash  Sales:  Mdse.,  $387.42;  consignments,  20  dozen  watermelons  (8)  at  $3.80;  25  crates 
peaches  (9)  at  $2.25;  50  crates  tomatoes  (12)  at  $2.00;  100  baskets  peas  (14)  at  $1.55. 

Accepted  C.  C.  Watson  &  Bro.'s  5-day  draft  for  $200.00,  on  account  of  Consignment  No.  11. 

Received  the  following  consignments  per  shipping  invoices:  No.  15,  Central  Commission  Co., 
1,000  watermelons.  No.  16,  J.  J.  Archibald  &  Co.,  200  crates  peaches.  No.  17,  C.  C.  Watson 
&  Bro.,  200  crates  tomatoes.  Gave  the  Q.  &  C.  R.  R.  Co.  check  for  $173.31  to  pay  freight,  distributed 
as  follows:     No.  15,  $52.50;  No.  16,  $45.27;    No.  17,  $75-54- 

Prove  cash;  post  all  items  to  date,  and  check  posting  for  the  22d,  23d,  and  24th. 

25.  Render  account  sales  for  Consignments  Nos.  8  and  9.  On  the  former  charge  ic  Drayage, 
iKc  Storage,  1%  Insurance,  6%  Commission;  and  on  the  latter  4c  Drayage,  5c  Storage,  1%  Insur- 
ance, 6%  Commission.  Four  watermelons  belonging  to  Consignment  No.  8  were  broken  in  handling, 
and  eaten  by  the  bookkeeper.  No  drayage  or  storage  is  charged  on  these.  Send  a  check  for  the 
net  proceeds. 

Borrowed  $1,000.00  at  the  bank  on  our  90-day  note,  and  received  credit  for  the  proceeds,  less 
8%    (per  annum)  discount. 


i9^  20tH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 

26.  Received  the  following  invoices:  C.  W.  Moody  &  Bro.,  $209.87.  dated  June  24th.  net  10 
days;  Short  Bros.,  $400.00,  dated  June  25th,  4/10,   n/30. 

Cash  Sales:  Mdse.,  $314.75;  consignments,  80  crates  cantaloupes  (11)  at  $2.00;  100  crates 
tomatoes  (12)  at  $1.90. 

Received  check  from  W.  A.  Daws  &  Son,  in  full  of  account. 

27.  Received  check  from  C.  W.  Dodge,  in  payment  of  note  and  interest  due  today. 

Credit  Sales:  W.  A.  Davis  &  Son,  city,  50  baskets  peas  (14)  at  $1.65.  D.  B.  Anderson,  25 
dozen  watermelons  (15)  at  $3.00;  25  crates  peaches  (16)  at  $2.25;  100  sacks  corn,  9,864  pounds,  at  63c. 

Gave  W.  W.  Scarborough  check  for  100  cases  eggs,  30  dozen  each,  at  2oKc.  Ship  these  to  Myers 
&  Michaels  to  be  sold  on  our  account  and  risk. 

Enter  the  purchase  in  §  306,  and  the  shipment  in  §  304. 

Gave  the  bank  a  check  in  payment  of  15-day  draft,  drawn  by  Donaldson  Bros,  on  the  12th. 

Gave  C.  W.  Moody  &  Bro.  check  in  full  of  invoice  received  on  the  nth.  Received  check  from 
the  Central  Hotel  in  full  of  account. 

Paid  employees  for  the  week  (Selling  Department),  $44.75. 
Prove  cash,  post,  and  checic  the  posting  for  the  25th,  26th,  and  27th. 

29.  Render  account  sales  for  Consignments  Nos.  11  and  12.  Charge  5c  a  crate  Storage,  4c 
Drayage,  1%  Insurance,  6%  Commission  on  each  consignment.  Credit  each  consignor's  account 
with  the  net  proceeds. 

Bought  the  building  in  which  we  are  doing  business,  and  the  lot  on  which  the  same  is  situated, 
paying  $5,000.00,  as  follows:  Cash,  $2,000.00,  and  three  notes  of  $1,000.00  each,  due  in  6,  12  and  18 
months,  respectively,  each  with  interest  from  date. 

Charge  the  Real  Estate  account  with  the  value  of  the  purchase.  Enter  the  cash  payment  in  the  cash  book,  and 
the  notes  in  the  journal. 

L.  B.  Thomas  reported  that  10  crates  of  the  tomatoes  shipped  him  (cash  sale)  on  the  24th  were 
spoiled,  and  asked  us  to  send  him  10  crates  in  place  of  these,  which  has  been  done.  These  tomatoes 
belonged  to  Consignment  No.  12,  and  are  replaced  from  Consignment  No.  17.  As  we  have  already 
rendered  an  account  sales  for  Consignment  No.  12,  it  is  necessary  to  charge  the  consignor's  account 
with  these  10  crates. 

Sold  Armstrong  Bros.,  City,  on  account,  25  crates  tomatoes  (17)  at  $2.00;  50  baskets  peas  (14) 
at  $1.65;  100  bushels  Irish  potatoes  at  65c. 

The  bank  sent  check  in  payment  of  Wilkerson  &  Wilkerson's  acceptance,  less  50c  collection  charges. 

30.  Paid  5-day  draft  drawn  by  C.  C.  Watson  &  Bro.,  and  accepted  on  the  24th.  Withdrew 
$200.00  for  private  use  (§  34). 

Received  the  following  consignments:  No.  18,  O'Neil  Bros.,  200  crates  peas;  No.  19,  Geo.  L. 
Atkinson  &  Co.,  Aiken,  100  baskets  cucumbers.  Gave  the  C.  R.  I.  &  P.  R.  R.  Co.  check  for  $50.57 
for  freight  on  the  above,  distributed  as  follows:     No.  18,  $28.46;  No.  19,  $22.11. 

Cash  Sales:  Mdse.,  $529.64;  consignments,  25  crates  berries  (13)  at  $2.75;  50  baskets  cucumbers 
(19)  at  $1.90. 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


299 


Received  an  account  sales  for  the  eggs  shipped  to  Geo.  W.  Potter  &  Son  on  the  23d.  They  sent 
check  for  $927.48,  in  payment  of  net  proceeds. 

Paid  bookkeeper's  salary  for  last  half  of  the  month,  $25.00;  M.  B.  Thompson,  services  for  the 
month,  $100.00;  Webb  Livery  Co.,  $35.00,  board  for  horses. 

Follow  instructions  given  below: 

1st.  Make  journal  entries  as  follows:  One  for  rent  for  the  month.  $125.00  (debit  §  169;  credit  §  133);  one  for 
the  5%  depreciation  on  office  equipment  (debit  §  169,  ^[5;  credit  §163,  ^4);  5%  depreciation  on  delivery  equipment 
(debit  §  170,  ^5;  credit  §  167,  1|  4;)  and  iV  the  amount  paid  for  insurance  (debit  §  169,  ^8;  credit  §  171,  ^f  3);  one  for 
the  valueof  stamps,  stationery,  etc.,  on  hand,  $36.50  (debit  §  194,  *\\  i;  credit  §  169,  T|  11);  one  for  $22.65  due  employ- 
ees in  the  Selling  Department  (debit  §  170,  1[  i;  credit  §  196,  ^  2.)  The  goods  shipped  to  Myers  &  Michael  on  the  27th 
have  not  been  sold,  hence  their  value  will  appear  among  the  Resources  on  the  Financial  statement. 

2d.  Prove  cash,  have  the  balance  approved  by  the  teacher,  and  rule  the  cash  book;  post  all  items  to  date,  including 
tl\e  totals  of  the  special  columns,  and  check  all  the  posting  to  date. 

3d.  Take  a  Trial  Balance.  This  is  made  from  the  accounts  in  the  general  ledger.  When  it  balances,  prove  the 
accounts  in  the  consignment  ledger,  by  comparing  the  total  of  the  balances  with  the  balance  of  the  Consignment  Ledger 
account  in  the  general  ledger. 

4th.  Make  the  Financial,  Trading,  and  Profit  and  Loss  statements.  The  value  of  salable  merchandise  on  hand 
is  $621.75. 

When  these  statements  have  been  approved  by  the  teacher,  close  the  ledger  by  journal  entries,  and  take  a  Proof 
Sheet  to  show  that  it  is  in  balance.     Present  all  books  to  the  teacher  for  approval. 


QUESTIONS. 


1.  Who  is  a  commission  merchant?     (§  217.) 

2.  What  accounts  are  peculiar  to  a  commis- 

sion business?     (§§  218,  219,  222,  310, 
and  311.) 

3.  Name  the  blank  books  to  be  used  in  the 

Commission  set,     (§  303.) 

4.  Describe  the  journal.     (§  304.) 

5.  Describe  the  sales  book.     (§  305.) 

6.  Describe  the  cash  book.     (§  306.) 

7.  Explain  the  method  of  proving  cash  with 

this   form.      (§  306.) 

8.  How  does  the  bookkeeper  know  whether 

the  goods  sold  belonged  to  regular  stock 
or  consignments?     (§  305,  Note.) 

9.  Describe  the  general  ledger.     (§  307.) 

10.  Describe  the  consignment  ledger.     (§  308.) 

11.  Name  the  accounts  to  be  kept  in  this  set. 

(§  309-) 

12.  Define  the  Storage  account.     (§  310.) 

13.  For  what  is  it  debited?     (*I[T[  i  and  2.) 

14.  For  what  is  it  credited?     (H  3.) 


15- 
16. 

17- 
18. 

19. 


20. 
21. 
22. 

23- 


24. 


25- 


Describe  the  method  of  closing.     (§  310.) 
Define  the  Consignment  Ledger  account. 

(§311.) 
For  what  is  it  debited?     (^^  i — 3.) 
For  what  is  it  credited?     (Iflf  4  and  5.) 
Describe  the  method  of  proving  the  con- 
signment ledger  with  the  Consignment 
account.     (§311.) 
Define  a  shipping  invoice.     (§  220.) 
Define  an  account  sales.     (§  221.) 
Why   does   the   consignee   send   the   con- 
signor an  account  sales? 
When  does  the  commission  merchant  be- 
come responsible  for  the  value  of  goods 
belonging  to  a  consignment?     (§  217.) 
Why  is  it  best  policy  for  a  merchant  to 
buy  the  goods  which  he  sells,  instead 
of     handling     them     on     consignment? 
(§  302.) 
What  class  of  goods  are  usually  sold  on 
consignment?     (§  302.) 


INDEX. 


Page 


Accountant,  §  6 1 1 

Accounting,  §3 11 

Accounts,  Defined,  §  16 13 

Classified,  §  20 14 

Accounts  Peculiar  to  a  Corporation,  §  244.,  223 

Account  Sales,  §  221 210 

Accounts  Used  in  the  Manufacturing  Busi- 
ness, §  284 264 

Admitting  a  Partner,  §  214 198 

Advertising  Account,  §  256 233 

Agency  Account,  §  278 255 

Analytical  Statement,  §  279 256 

April. 129 

Arrangement  of  Accounts  m  Ledger,  §  190...  165 

Articles  of  Copartnership,  §  148 129 

Assessment,  §  238 222 

Assets,  §  21 14 

Auditing,  §2 11 

Auditor,  §5 11 

August 254 

Auxiliary  Books,  §  182 158 

B 

Balance  Sheet,  §  82 60 

Bank,  Defined,  §101 73 

Keeping  the  Bank  Account,  §  107 75 

Bill  of  Lading,  §  206 189 

Bills  or  Invoices,  §  50 37 

Blank  Books,  §  35 31 

Blank  Books  in  Part  II,  §  172 152 

Blank  Books  in  Part  III 236 

Blank  Books  in   Part  IV   (Single  Entry), 

§295--; .••.•••   276 

Blank    Books   in    Part    IV    (Commission), 

§303 286 

Bonds,  §  240 222 

Bookkeeper,  §  4 11 

Bookkeeping,  §  i , 11 

Bookkeeping  for  a  Partnership,  §  149 130 

Books  of  Complete  Entry,  §  37. 31 

Books  of  Original  Entry,  §  36 31 

Branch  Store  Account,  §  277 254 

Business  Letter,  §  189 163 

Business  Papers,  §  49 37 

Business  Transactions,  Defined,  §  8 12 

Classified,  §§  9-15 12 

C 

Candy  Department  Account,  §  287 266 

Capital,  Defined,  §  232 220 

Capital  Stock,  Defined,  §  231 220 

Common  Stock,  §  235 221 

Preferred  Stock,  §  236 221 

Treasury  Stock,  §  242 222 

Capital  Stock  Account,  §  245 223 


Page 

Cash  Account,  §  27 17 

Cash  Book,  February,  §  114 80 

April  and  May,  §§  177-180 156 

June,  §  215 202 

Cash  Book,  Part  III,  §  264 240 

Cash  Book,  Part  IV  (Single  Entry),  §  297..   278 
Cash  Book,  Part  IV  (Commission),  §  306. .  .    289 

Cash  Journal,  §  288 267-274 

Certificate  of  Stock,  §  233 220 

Certified  Check,  §  208 .    192 

Certified  Public  Accountant,  §7 11 

Changing  from  a  Partnership  to  a  Corpora- 
tion, §  243 222 

Changing   from   Single   to    Double   Entry 

§301 282 

Charter,  §  230 220 

Checking  the  Posting,  §  65 48 

Checks,  Defined,  §  104 74 

Instructions  for  Writing,  §  105 74 

Check  Book  in  Part  II,  §  181 157 

Check  Book,  Part  III,  §  274 249 

Classification  of  Accounts,  §  20 14 

Closing  the  Ledger,  Defined,  §  84 63 

January  31,  §  89 64 

February  28,  §  128 91 

March  31,  §  143 105 

April  30,  §  203 184 

August  31,  §  282  (Corporation) 260 

September  30,  §  291 274 

October  31  (Single  Entry),  §  300 282 

Closing  Ledger  by  Journal  Entries,  §  200  174 
Closing  a  Profit  or  Loss  Account,  §§  85-87  63 
Closing  a  Resource,  Liability  or  Investment 

Account,  §  88 64 

C.  O.  D.  Shipment,  §  223 211 

Collecting  Notes  and  Drafts,  §  209 193 

Commercial  Paper,  Defined,  §  93 69 

Regarded  as  (Zash,  §  100 71 

Commission  Account,  §  222 210 

Commission  Merchant,  §  217 206 

Commission  and  Produce  Business,  §  302 .  .    285 

Commission  Cash  Book,  §  306 289 

General  Ledger,  §  307 290 

Journal,  §  304 286 

Sales  Book,  §  305 287 

Common  Stock,  §  235 221 

Compound  Journal  Entries,  §  139 103 

Consignment  Account,  §219 207 

Consignment  Ledger,  Defined,  §  308 290 

Consignment  Ledger  Account,  §311 291 

Controlling  Accounts,  §  249 226 

Corporation,  Defined,  §  224 218 

Manner  of  Organization,  §  225 218 

Method  of  Conducting  the  Business, 

§  226 219 

Responsibility  of  Investors,  §  227 219 

Manner  of  Dissolution,  §  228 219 

Object  of  Organization,  §  229 219 

Corporation   Accounting 217 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


301 


Page 

Correcting  Errors,  §211 196 

Creditor  Accounts,  §  30 21 

Credit  Bill,  §  205 189 

Customer  Accounts,  §  29 19 

D 

Day  Book,  §  296 278 

Debits  and  Credits,  Defined,  §  17 13 

Delivery  Equipment  Account,  §  166 145 

Delivery  Expense  Account,   §  255 232 

Deposit  Ticket,  Defined,  §  102 73 

Instructions  for  Making,  §  103 73 

Difference  of  an  Account,  §  18 14 

Dividend,  Defined,  §  237 221 

Dividend  Account,  §  247 225 

Double  Entry,  Defined 10 

Double  Entry  and  Single  Entry  Compared, 

§294 276 

Drafts,  Defined,  §  94 69 

Sight,  §  95 69 

Time,  §  96 70 

Original  Use,  §  97 70 

Present  Use,  §  98 70 

Duties  of  a  Bookkeeper,  §§  52-56 38 

£ 

Endorsement,  Defined,  §  108 76 

Transfer,  §  109 76 

Receipt  of  Part  Payment,  §110 77 

Accommodation,  §111 77 

Exchange,  §  212 196 

Expense  Account,  §  32 26 

F 

Face  Value  of  a  Note,  §  138 100 

February 69 

Files,  §  59 39 

Financial  Statement  Defined,  §  79 57 

January  31,  §  81 58 

February  28,  §  126 88 

March  31,  §  141 105 

Fiscal  Period,  §  74 54 

Fixed  Assets,  §  121 84 

Freight  In  Account,  §  156 136 

Freight  Out  Account,  §  259 234 

Furniture  and  Fixtures  Account,  §  122 84 

G 

General  Admr.  Expense  Account,  §  169.. . .  147 

General  Ledger,  Part  III,  §  269 246 

General    Ledger,    Part    IV    (Commission), 

§  307 290 

Goods  Returned  Book,  §  268 246 

Good  Will  Account,  §  252 229 


I  Page 

Important  Facts  Learned  in  January,  §  92.  66 
Important  Points  about  Closing  the  Ledger, 

§9i--; : 65 

Important  Points  about  Posting,  §63....  47 
Important  Points  about  the  Statement  of 

the  Business,  §  83 60 

Important  Points  about  the  Trial  Balance, 

§68 52 

Imprest  Fund,  §  265 243 

Income  Accounts,  §  23 15 

Indexing  the  Ledger,  §  191 165 

Information  relative  to  Coal,  Hay,  etc.  §  186  161 

Insurance  Account,  §  171 151 

Interest,  Defined,  §  134. 97 

Rule  for  Calculating,  §  136 100 

Interest  Account,  §  135 98 

Introduction  to  Part  III 217 

Inventory,  Defined,  §  75 54 

Liability,  §  77 56 

Resource,  §  76 55 

Inventory  Account,  §  157 137 

Investment  Accounts,  §  26 16 

Investment  Account  (W.  H.  Goodwin),  §  34    28 

Invoice  of  Shipment,  §  220 210 

Invoices  or  Bills,  §  50 37 

J 

January 37 

Journal,  Defined,  §  38 31 

Illustrated 32 

Journal,  Part  II,  §  175 156 

Journal,  Part  III,  §  261 236 

Journal  Entires  Required  at  Close  of  Fiscal 

Period,  §  199 172 

July 217 

June 202 

L 

Ledger,  Defined,  §  39 32 

Illustrated 32 

Liability,  Defined 9 

Liability  Accounts,  §  22 15 

License,  §  58 39 

M 

March 94 

May 189 

Merchandise  Account,  §  31 24 

Merchandise  Discount  Defined,  §  158 138 

Method  of  Keeping  an  Account  with  the 

Bank,  §  107 75 

N 

Negative  Accounts,  §  19 14 

Note,  Defined,  §  99 7° 


302 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Page 

Notes  Payable  Account,  §  124 89 

Notes  Payable  Book,  Part  II,  §  184 159 

Notes  Payable  Book,  Part  III,  §  267 245 

Notes  Receivable  Account,  §  123 85 

Notes  Receivable  Book,  Part  II,   §  183.  .  .  .    159 
Notes  Receivable  Book,  Part  III,  §  266..  .   244 

O 

October 276 

Office  Equipment  Account,  §  162 142 

Office  Files,  §  59 39 

"On  Account,"  §  57 38 

Opening  an  Account  with  the  Bank,  §  106..  75 

Operating  Accounts,  §  24 15 

Original  Use  of  Drafts,  §  97 70 

P 

Part  I II 

Part  II 129 

Part  III 217 

Part  IV 276 

Partners'  Accounts,  §  150 131 

Partner's  Capital  Account,  §151 131 

Partner's  Personal  Account,  §  152 132 

Partnership,  Defined,  §  145 129 

Object  of  Forming,  §  146 129 

Capital,  §  147 129 

Articles  of  Agreement,  §  148 129 

Bookkeeping,  §  149 130 

Part  Payment  subject  to  Discount,  §  188.  .  162 

Personal  Accounts,  §  28 18 

Petty  Cash  Book,  §  265 243 

Plant  &  Machinery  Account,  §  285 264 

Posting  from  the  Journal,  Defined,  §  60.  .  .  39 

January  13,  §  61 39,  44-47 

Sales  Book,  Journal  and  Cash  Book, 

§  116 82 

Sales  Book,  February,  §  117 82 

Journal,  February,  §118 82 

Cash  Book,  February,  §§  119,  120.  ...  82 

Power  of  Attorney,  §  275 249 

Preferred  Stock,  §  236 221 

Present  Use  of  Drafts,  §  98 70 

Profit  &  Loss  Account,  §  33 27 

Profit  &  Loss  Statement,  §  80 57 

January  31,  §  81 58 

February  28,  §  127 90 

March  31,  §  142 105 

Proof  Sheet,  Defined,  §  90 64 

January  31 65 

February  28,  §  129 91 

March  31,  §  144 105 

April  30,  §  204 1 86 

August  31,  §  283  .  .  . ; 260 

September  30,  §  292 274 

Property,  Defined, 9 

Proving  Cash  (Cash  Account),  §  64 48 

Cash  Book,  §  115 82 


Page 

Purchases  Account,  §  154 135 

Purchases  Book,  §  130 94 

Purchases  Book,  Part  II,  §  174 153 

Purchases  Book,  Part  III,  §  263 238 

Purchases  Discount  Account,  §  159 138 

Purchases  Ledger,  Part  III,  §  270 246 

Purchases  Ledger  Account,  §  250 227 

R 

Real  Estate,  Defined,  §  131 95 

Real  Estate  Account,  §  132 95 

Real  Estate  Expense  &  Rev.  Account,  §  133.  96 

Receipt,  Defined,  §  51  ........ 37 

Reconciliation  of  the  Bank  Account,  §107  a  76 

Recording  Transactions,  §  40 33 

Reserve  Accounts,  §  19 14 

Office  Equipment,  §  163 143 

Store  Fixtures,  §  165 144 

Delivery  Equipment,  §  167 145 

Bad  Debts,  §  213 ' 197 

Plant  and  Machinery,  §  286 265 

Resource,  Defined 9 

Resource  Accounts,  §  21 14 

Retail  Business,  §  185 161 

Rules  for  Determining  Debits  and  Credits, 

§§41-47 33 

Debits  and  Credits  (General),  §  48.  .  .  .     34 
Rules  for  Detecting  Errors  in  a  Trial  Bal- 
ance, §  210 194 

Ruling,  §  73 53 

Ruling  Personal  Accounts,  §  62 47 

S 

Salaries   in    Selling    Department   Account, 

§258 234 

Sales  Account,  §  155 136 

Sales  Book,  February,  §  113 78 

Sales  Book,  Part  II,  §  173 152 

Sales  Book,  Part  III,  §  262 236 

Sales  Discount  Account,  §  160 139 

Sales  Ledger,  Part  III,  §271 247 

Sales  Ledger  Account,  §  251 228 

Schedule  or    Exhibit  §  280 257 

Selling  Expense  Account,  §  170 *.  .  .  149 

September 264 

Shipment  Account,  §  218 206 

Shipping  Invoice,  §  220 210 

Sight  Draft,  §  95 69 

Signing  Commercial  Papers,  §  112 77 

Single  Entry,  Defined 10 

Single  Entry  and  Double  Entry  Compared, 

§  294 276 

Single  Entry  Bookkeeping,  §  293 276 

Single  Entry  Day  Book,  §  296 278 

Cash  Book,  §  297 278 

Ledger,  §  298 279 

Single  Entry  Statement,  §  299 282 

Sinking  Fund,  §  241 222 

Special  Accounts  with  Expense,  §  168 147 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


303 


Page 
Special  Accounts  with  Fixed  Investments, 

§  161 142 

Special  Accounts  with  Merchandise,  §  153  134 
Special    Accounts    with    Selling    Expense, 

§253 230 

Special  Columns,  §  176 156 

Special  Profit  &  Loss  Accounts,  §  25 15 

Statement  of  Account,  §  192 167 

Statement  of  the  Business,  §  78 56 

January  31,  §  81 58 

February  28,  §§  126,  127 88 

March  31,  §§  141,  142 105 

April  30,  §  202 179 

August  31,  §  281   (Corporation) 260 

September  30,  §  290 274 

Stock  Certificate  Book,  §  272 247 

Stockholder,  §  234 221 

Stock  Ledger,  §  273 248 

Storage  Account,  §  310 291 

Store  Fixtures  Account,  §  164 144 

Sundry  Resource  Inventories,  Defined, §  193  168 

Sundry  Resource  Inventories  Account,  §  194  168 

Sundry  Liability  Inventories,  Defined,  §  195  168 

Sundry  Liability  Inventories  Account,  §  196  169 

Surplus  Account,  §  246 224 

Surplus  Fund   §  239 222 


Page 
T 

Telegram,    §  207 191 

Terms  on  Account,  §  57 38 

Terms  on  Bills,  §  187 162 

Terms  Peculiar  to  a  Corporation 220 

Time  Draft,  §  96 70 

Time  in  Interest  Calculations,  §  137 100 

Trading  Account,  §  198 171 

Trading  Statement,  §  197 169 

Traveling  Expense  Acc't,  §§  216,  257  . .  .203,233 

Treasury  Stock,  Defined,  §  242 222 

Treasury  Stock,  Account,  §  248 226 

Trial  Balance 49 

Defined,  §  66 50 

January  31,  §  67 50 

February  28,  §  125 88 

March  31,  §  140 104 

April  30,  §  201 179 

July  31,  §  276 249 

September  30,  §  289 274 

U 

Use  of  Red  Ink  in  Bookkeeping,  §  69-72. .  .     53 

W 
Warehouse  Expense  Account,  §  254 230 


LIST  OF  ILLUSTRATIONS. 


Number  Page 

1  Cash  Account  for  January 17 

2  An  Account  with  a  Customer 20 

3  An  Account  with  a  Creditor 22 

4  Merchandise  Account  for  January 25 

5  Expense  Account  for  January 27 

6  Profit  &  Loss  Account,  January  31 28 

7  An  Investment  or  Capital  Account 29 

8  Form  of  Journal 32 

9  Form  of  Ledger 32 

ID  The  Practical  Application  of  Rules  1-7.  34 

1 1  Form  of  Bill  for  Sale  made  January  4 .  .  37 

12  Receipt,  January  9 38 

13  Journal,  January  1-6 40 

14  Journal,  January  6-13 41 

15  Ledger  Accounts,  January  1-13 42 

16  Ledger  Accounts,  January  1-13 43 

17  Trial  Balance,  January  31 52 

18  Inventory,  January  31 55 

19  Financial  Statement  (W.  H.  Goodwin), 

January  31 58 

20  Profit  and  Loss  Statement  (W.  H.  Good- 

win), January  31 59 

21  Balance  Sheet,  January  31 61 

22  Proof  Sheet,  January  31 65 

23  Sight  Draft 69 

24  Time  Draft— Acceptance 69 


Number  Page 

25  Promissory  Note Jo 

26  Specially  Arranged  Personal  Check 71 

27  Bank  Draft — "New  York  Exchange"..  .  71 

28  Cashier's  Check 72 

29  Express  Money  Order 72 

30  Deposit  Tickets,  February  i,  and  13  .  .  .  74 

31  First  Page  of  Check  Book — February..  75 

32  Showing  Position  of  Endorsement 76 

33  Sales  Book 79 

34  Debit  side  of  Cash  Book — February...  .  80 

35  Credit  side  of  Cash  Book — February.  .  .  81 

36  Furniture  and  Fixtures  Account 84 

37  Notes  Receivable  Account 86 

38  Notes  Payable  Account 87 

39  Financial  Statement  (W.  H.  Goodwin), 

February  28 89 

40  Profit  and  Loss  Statement  (W.  H.  Good- 

win), February  28 90 

41  Proof  Sheet,  February  28 91 

42  Purchases  Book,  March  1-15 94 

43  Real  Estate  Account 96 

44  Real  Estate  Expense  and  Rev.  Account  96 

45  Interest  Account 9^ 

46  Compound  Journal  Entries 103 

47  Partner's  Capital  Account 131 

48  Partner's  Personal  Account 132 


304 


20TH  CENTURY  BOOKKEEPING  AND  ACCOUNTING. 


Number  Page 

49  Purchases  Account 135 

50  Sales  Account 136 

51  Freight  In  Account 137 

52  Inventory  Account 138 

53  Purchases  Discount  Account 139 

54  Sales  Discount  Account 139 

55  Office  Equipment  Account 142 

56  Reserve     for     Depreciation     of     Office 

Equipment   Account 143 

57  General  Admr.  Expense  Account 148 

58  Selling  Expense  Account 149 

59  Insurance  Account 151 

60  Debit  side  of  Cash  Book — ^April 154 

61  Credit  side  of  Cash  Book — ^April 155 

62  First  Page  of  Check  Book — April 158 

63  Left  Page  of  Notes  Receivable  Book...  .  160 

64  Left  Page  of  Notes  Payable  Book 160 

63  Right  Page  of  Notes  Receivable  Book. .  161 

64  Right  Page  of  Notes  Payable  Book 161 

65  A  Business  Letter 164 

66  Statements  of  Accounts 166 

67  Sundry  Resource  Inventories  Account..  168 

68  Sundry  Liability  Inventories  Account..  .  169 

69  Trading  Account 171 

70  Journal  Entries  Required  at  the  Close 

of  the  Fiscal  Period 1 73 

71  Journal  Entries  Required  to  Close  the 

Ledger...  . 175 

72  Journal     Entries    Required    after    the 

Ledger  is  Closed 177 

73  Trial  Balance,  April  30 : 180 

74  Financial  Statement,  April  30 181 

75  Trading,  and  Profit  and  Loss  Statement, 

April  30 182 

76  Profit  and  Loss  Account,  April  30 184 

77  Proof  Sheet,  April  30 185 

78  Credit  Bill 189 

79  Third  Form  of  Bill  of  Lading 190 

80  Second  Form  of  Bill  of  Lading 190 

81  First  or  Original  Form  of  Bill  of  Lading  190 

82  Regular  Day  Message  of  Ten  Words.  . .  191 

83  Night  Letter 192 

84  A  Certified  Check 193 

85  Traveling  Expense  Account 203 

86  Debit  Side  of  Cash  Book — June 204 

87  Credit  Side  of  Cash  Book — June 205 


Number  Page 

88  A  Shipment  Account 206 

89  A  Consignment  Account 208 

90  An  Invoice  of  Shipment 209 

91  Account  Sales 210 

92  The  Commission  Account 211 

93  Both  Sides  of  an  Express  C.O.D.  Env.  212 

94  Capital  Stock  Account 224 

95  Surplus  Account 225 

96  Dividend  Account 226 

97  Purchases  Ledger  Account 228 

98  Sales  Ledger  Account 229 

99  Warehouse  Expense  Account 231 

00  Advertising  Account 233 

01  Journal — July 237 

02  Left  Page  of  Purchases  Book — July.  .  .    238 

02  Right  Page  of  Purchases  Book^July. .    239 

03  Debit  Side  of  Cash  Book — July 240 

04  Credit  Side  of  Cash  Book — July 241 

05  Petty  Cash  Book 244 

06  A  Creditor's  Account  (Purchases  Led- 

ger)     247 

07  Stock  Certificate  Book 248 

08  Stock  Ledger 248 

09  Branch  Store  Account 255 

ID  Analytical  Statement,  August  31 257 

11  Financial  Statement,  August  31 258 

12  Trading,  and  Profit  and  Loss  Statement, 

August  31... 259 

13  Plant  and  Machinery  Account 265 

14  Reserve    for    Depreciation  of  Plant  & 

Machinery  Account 265 

15  Candy  Department  Account 267 

16  Cash  Journal 268 

16  Cash  Journal  (Continued) 269 

16  Cash  Journal  (Continued) 270 

16  Cash  Journal  (Concluded) 271 

17  Single  Entry  Day  Book 277 

18  Single  Entry  Cash  Book 278 

19  Single  Entry  Statement 283 

20  Journal  Entry  to  change  from  Single 

to  Double  Entry 284 

21  Commission  Journal 286 

22  Commission  Sales  Book 287 

23  Debit  Side  of  Commission  Cash  Book.    288 

24  Credit  Side  of  Commission  Cash  Book.  289 

25  Consignment  Ledger 290 


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